Is it legal for an owner of a restaurant to charge his wait staff a flat 5% of all credit card tips they earn?

Question

He does this as to offset the commission he pays to the credit card companies, but I'm fairly certain he doesn't pay them 5%, which if is the case, he is profiting off his employees. He also only pays the normal server rate of $2.83 an hour for a two week training period even though in that time, the servers aren't allowed to wait tables and collect tip money.

Answer 1

I don't think it is illegal, but maybe you can negotiate with him as a group for a lower amount.  I believe that most credit card companies charge 2% except American Express wihich charges 4%.

Answer 2

This is highly illegal. Federal labor laws explicitly prohibit this type of activity. I would kindly explain to the owner that he is violation of Federal Law and likely state laws.(You did not mention which state you are in.)

Answer 3

"Federal law expressly allows for the practice of deducting the credit card charge from tips left on a credit card. Where allowed by state law, this is our practice," Landry's executive vice president Steven Scheinthal said in a statement. He declined to comment further.

Landry's policy was upheld in a Houston federal court a few years ago in a class-action suit filed against the chain on behalf of six servers at a Joe's Crab Shack in Chicago.

The Fair Labor Standards Act permits an employer to deduct the processing fee from an employee's tip as long as the deduction does not put the employee's pay below the minimum wage.

The practice is prohibited in some states, such as California and Colorado, but it is legal under federal labor laws. Where permissible, some operators continue to make servers pay the proportion of the fees related to tip amounts, despite controversies and the risk of losing disgruntled employees.

Answer 4

The commissions to the credit card companies are part of his cost of doing business and that money should come from his customers, not his employees.  He's scamming the help.