An Employer’s 6-Step Guide: Hospitality employers who utilize the 'tip credit' under federal wage and hour law may feel as if they operate with a bullseye on their backs given the multi-prong assault underway against the practice.

Not only are you in danger of being hit with a costly lawsuit if you use the tip credit, but you can’t help but see the federal and state governments attacking the concept itself.

But could there be an easy alternative hiding in plain sight that could lighten your burden and take that target off your back?

A recent federal appeals court decision in a case involving the celebrity restaurant owner known as Salt Bae shows how the service charge could be a possible solution – and this Insight will provide a six-step blueprint should you decide to walk this alternative path.

Multi-Prong Attack Against the Tip Credit

Using the tip credit in this day and age could sometimes feel like fraught with danger, as various challenges seem to pop up each new day.

Lawsuits Remain a Constant Threat – and They’re Increasing

The odds of being targeted with a tip-credit related lawsuit have certainly increased over the years. Litigation under the Fair Labor Standards Act (FLSA) generally increased 270% between 2000 and 2020, with tip-credit claims undoubtedly contributing to that growth.

As employers know, these lawsuits are expensive, time-consuming, and can result in unfair media characterizations (i.e., 'Wage theft!').

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