by Bernard D. Nomberg, Partner, The Nomberg Law Firm
Before we get into this week’s topic on tips, just a quick update on President Trump’s nominee for Labor Secretary. President Trump’s nominee for Labor Secretary, Andrew Puzder, withdrew from consideration this week, reportedly based on his abuse of his ex-wife and employing an undocumented immigrant as his housekeeper. We previously discussed on NomBlog our concerns with Mr. Puzder serving as the head of the U.S. Department of Labor. Alexander Acosta was nominated by President Trump as labor secretary. For more information on Mr. Acosta, please follow the link: https://www.reuters.com/article/us-usa-trump-labor-idUSKBN15V271. Alright, on to this week’s topic: tips as wages and how they relate to the work comp claim.
Average weekly wage or AWW is a phrase used frequently concerning workers’ compensation claims. The average weekly wage are the wages you were paid by your employer in the 52 weeks before you got hurt, added up, then divided by 52. The average weekly wage determines the amount of your temporary total disability benefits or TTD, which is the money you are paid after being hurt but not able to work according to your authorized treating physician.
Some jobs, however, rely on tips and gratuities to supplement their average wage. Depending on the arrangement with your employer, your hourly wage may be low, but when tips are factored in, your wages increase tremendously. When receiving workers’ compensation benefits, however, it is important to know when those tips and gratuities can be considered in the total wage amount.
Determining whether wages or tips are included in the average wage calculation depends on various factors. One factor includes whether the tips have been reported for tax or insurance purposes. Typically, where an employee has failed to report their tips for tax purposes, it is unfair to them claim them for workers’ compensation purposes. The court may still allow it though, in cases where an employer has instructed the employee on how to report.
Tips are most certainly considered income for those who earn them to pay their bills each month, but whether they are considered wages for workers’ compensation purposes is a whole different ballgame. Employee tips are to be included in a wage calculation where they were discussed upon hiring and potentially even put into the hiring contract as part of the employee’s pay. On the other hand, if the employee’s wage speaks for itself and tips are merely supplementary to the employee’s wage, tips and gratuities are not to be included
In some states, employees who earn tips are required to report their tip earnings to their employer. However, reporting tips for tax purposes, but not to an employer may still be sufficient to include them in a wage calculation. Even still, the court has found unreported tips to be included in a wage calculation in certain instances such as where the employer knew of the employee receiving tips.
The phrasing of workers’ compensation statutes is also relevant in determining whether the tips are to be calculated as wages. Where the statute indicates “Wages, earnings, and salary,” there is some wiggle room to argue that tips are considered “earnings.” Strict statutes that merely state “wages” may limit an employee’s argument in regards to their tips and require a showing that the employee had an understanding that tips were to be included as part of their wage.
In Alabama, wages are defined, in part, as “average weekly earnings” based on those earnings subject to federal income taxation and reportable on the Federal W-2 tax form. Section 25-5-1(6), Code of Alabama, 1975.
If you are questioning how your average weekly wage is calculated, what amount you should receive for your temporary total disability benefits or settlement, and whether tips should be included in that amount, we are happy to help. Call an experienced workers’ compensation attorney today to discuss your rights. If you have questions about a workers’ compensation claim, please call us today at (205) 930-6900. To find out more about the Nomberg Law Firm, go to our website nomberglaw.com.
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Bernard D. Nomberg has practiced workers’ compensation law in Alabama for more than 20 years. Bernard has earned an AV rating from Martindale-Hubbell’s peer-review rating. He has been selected a Super Lawyer by Super Lawyers Magazine as well as a Top Rated Attorney by B-Metro Magazine.