Published on:

Workers’ Compensation for Tipped Employees in Massachusetts

Workers’ compensation is a benefit afforded to almost all employees in Massachusetts, including those who work primarily for tips. While this work arrangement is common in restaurants and other service industry jobs, it can sometimes complicate the question of benefits owed in the event of a work-related injury. restaurant

This is why it’s so important to have an attorney who is experienced in workers’ compensation law to fight not only for the right to benefits, but also for the full amount of benefits you deserve.

In a recent case before the Kentucky Supreme Court, justices were asked to consider whether the administrative law judge who weighed a plaintiff’s workers’ compensation claim appropriately calculated her average weekly wage. (This figure is important because it determines how much an injured worker receives in benefits. Massachusetts General Law offers up to 60 percent of a worker’s gross average weekly pay – up to the state maximum – for workers who receive temporary total disability.)

Plaintiff asserted that she was a variable wage employee, which meant she received a salary plus tips, at the time of her work injury. She argued that this was the figure that should be used to determine her benefits. The administrative law judge agreed with her, despite the employer’s argument that plaintiff was solely a salaried employee.

Plaintiff began working as a waitress at a diner in 2009. She was responsible to seat customers, take orders, serve customers, stock the salad bar, bus the tables and collect customer payments. For all this, she received $2.10 in hourly pay. Often, she worked 40 hours a week or more. That meant a weekly paycheck of about $84, before taxes. Then in 2010, the owner tasked her with additional responsibilities, on top of what she already did as a server. For this, she was to receive a flat weekly rate of $100, plus tips.

However, with this new arrangement, her employer failed to report her tips to the Internal Revenue Service. However, plaintiff didn’t learn about this until she received her W-2 form in 2010, though she did not include her unreported tip income on her personal taxes either.

Seven months after her “promotion,” plaintiff slipped and fell at work, suffering serious injury to her spine. She was required to undergo a spinal fusion surgery. She also filed a workers’ compensation claim.

The administrative law judge, accepting review of that claim and determining plaintiff’s average weekly wages, applied the statute for tipped employees. The judge held that even though plaintiff’s tips at the time of her injury hadn’t been reported to the IRS, she was still entitled to classification as a variable wage employee working on a wage plus tips arrangement.

Defendant employer insisted that at the time of plaintiff’s injury, she was a salaried, fixed wage employee (nevermind that this amount would have put her at receiving well below the federal minimum wage). The employer argued that because the tips weren’t reported for income tax purposes, they couldn’t be considered “wages” for the purpose of tabulating plaintiff’s average weekly wages.

Plaintiff agreed that unreported tips received from May to December of that year can’t be used to tally her average weekly wage, but as the ALJ determined, that doesn’t change the fact that she was an employee with variable income derived from tips – not a worker on a fixed weekly wage. The effect of that is the average weekly wage earnings is calculated for each yearly quarter in the last year, with the highest (most favorable) weekly average used in this calculation. That method was used to determine plaintiff’s average weekly wages – and the first quarter of the year resulted in a finding of much higher average weekly wages for the last three quarters. This is true even though her earnings in the last three quarters were in all likelihood higher than the first, given the tips she received, but those unreported couldn’t be counted.

The full board affirmed, as did the court of appeals and ultimately the Kentucky Supreme Court.

If you are the victim of Massachusetts product liability, call the Law Offices of Jeffrey S. Glassman for a free and confidential appointment — 1-888-367-2900.

Additional Resources:

Commonwealth, Uninsured Employers’ Fund v. Sidebottom, Feb. 16, 2017, Kentucky Supreme Court

More Blog Entries:

OSHA Cites Gutter Firm After Worker Injured in Fall, Feb. 15, 2017, Boston Workers’ Compensation Lawyer Blog