Is This Really Necessary?

September 25, 2006

A Florida man is seeking to form a Pizza Delivery Driver Union

“When they declared us tipped employees and refused to pay us the Florida minimum wage of $6.40, I was kind of angry. I came home that night and I told my buddy, I said ’We are forming a union,’” he said.

Jim Pohle feels that his employer is doing him a disservice by declaring him (and his Komrades) “tipped employees,” which eliminates the minimum wage requirement. This is clearly a case of wanting to have one’s cake and eat it, too. But we need to consider a few very important points. Generally, the “tipped employee” carve-out with regards to minimum wage is made on the assumption that most tipped employees earn far more than the minimum wage. When you are not considered a “tipped” employee, the assumption is that a zero- or negligible portion of your income will come from gratuities. Without debating the economic merits or efficacy of minimum wage laws, I will concede that the stated purpose is to ensure a “just compensation.” Tipped employees, whose wages regularly exceed the minimum wage, should of course not be paid minimum wage by the employer - they are paid minimum wage (and often more) by the patrons who tip them. I see no contradiction here; I see no reason why employees who have reasonable expectations of receiving significant tips should be treated any differently than 100% commission occupations, like financial services or commercial sales.

But the flip-side of this, is that most tipped employees routinely engage in tax evasion - failing to declare the entirety of their tips. Tipped employees have a strong incentive to under-report their tip-wages, and there is precious little that the IRS can do about this. Credit card tips, can of course be accounted for, but cash tips cannot. Of course the problem is tax-evasion. Cash tips are simply not verifiable. I’ve worked in the service industry before, as a tipped waiter. I could make $150-200 on a Friday or Saturday night, in 5 hours. I had a roommate in college who would make $300-500/weekend delivering pies late at night. This has been the case in any service job I’ve ever had, or with which I’m familiar.

A theoretical solution to this Mr. Phole’s conundrum is: Report your tips over the course of your pay period. Divide said amount by hours worked. If said quotient is less than the statutory minimum wage, the employer makes up the difference. If the amount exceeds the minimum wage, the employer contributes nothing (or the statutory minimum wage for service industry employees). Of course, this half-assed solution does nothing except shift the burden of income verification from the Feds to the individual’s employer. The incentive to “cheat the system” does not cease to exist.

Mr Pohle is subject to the minimum wage law, just not the particular law that he would prefer. What Jim Pohle wants, is the tax-benefit of being a tipped employee, and the legal protection of being subject to the Florida minimum wage law.

This case should be thrown out of court. But I’m not holding my breath.


Posted in: Potpourri

Comments

2 Comments so far

  1. SP September 26, 2006 9:49 pm

    I used to deliver pizza in Ohio, and always made wages in excess of the minimum wage, as high as 7 bucks an hour at one store. Tips were all extra on top of that. In fact, as far as college jobs go, its hard to beat. I loved it.

    I guess things are different in Florida.

  2. smilerz September 28, 2006 9:23 am

    I bet he is going to love paying union dues out of his minimum wage check.

    Anyway, wouldn’t it simply be easier to get a different job? There is never an excess of delivery drivers - in my 8 years in the pizza business I hired nearly everyone that applied for the job.

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