Las Vegas Injury Lawyers Blog

In April 2009, Gareth Pitts filed a class action complaint against his employer, Terrible Herbst, Inc., for failing to pay Pitts and other employees' overtime and minimum wages. Pitts alleged that Terrible Herbst had violated the Fair Labor Standards Act (FLSA) and Nevada Labor Laws, and committed a breach of contract.

Before Pitts filed a motion for class certification, Terrible Herbst made a Rule 68 offer of judgment for $900, even though Pitts only claimed $88 in damages. Pitts then sought to abandon his FLSA claims and pursue only his Rule 23 class action available under the Federal Rules of Civil Procedure. Before Pitts could amend his claim but after Pitts rejected the offer of judgment, Terrible Herbst filed a motion to dismiss claiming its offer of judgment rendered the entire case moot. Though the court disagreed that an offer of judgment rendered the entire case moot, Pitts' case was dismissed with prejudice because Pitts failed to timely file the class certification for just a Rule 23 class action. Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1085 (9th Cir. 2011)

On Pitts' appeal, the Ninth Circuit reversed, holding that an unaccepted offer of judgment does not moot a case because allowing a defendant to "buy off" a class action by making an offer of judgment to satisfy a plaintiff's claim would make a matter transitory such that it would evade review. The Ninth Court further held that by giving a written response to a motion to dismiss, Pitts communicated to the district court, his desire to abandon his FLSA claims. Amendment of his complaint was not necessary. Further, Pitts' dismissal of his federal claims does not divest the district court of its power to exercise supplemental jurisdiction unless the claims were devoid of merit or frivolous, which is not the case here. If the district court were to certify a class, certification would relate back to the filing of the complaint.

The Ninth Circuit remanded Pitts' state law claims back to state court, and denied Terrible Herbst's motion to dismiss the breach of contract claim. Pitts v Terrible Herbst, Inc., No. 2:09-CV-940-RCJ-RJJ (D. Nevada, December 7, 2011)

Continue reading "A Rejected Offer of Judgment Does Not Prevent a Class Action for Unpaid Overtime" »

The Ninth Circuit holds that social workers, employed by the State of Washington, are not "learned professionals" as their position does not require a degree in a specific discipline. Social workers are thus covered by the Fair Labor Standards Act (FLSA) and entitled to overtime compensation for all hours worked in excess of 40 hours in a week.

The DSHS is a public agency created by the Washington legislature to "integrate and coordinate all those activities involving provision of care for individuals who, as a result of their economic, social or health condition, require financial assistance, institutional care, rehabilitation or other social and health services." Wash. Rev. Code § 43.20A.10. Under DSHS policy, individuals hired into social worker 2 and social worker 3 positions have to have attained rigorous educational qualifications, which include having a bachelor's degree or higher in one or more degree areas - social services, human services, behavioral serviced, or an allied field - from an accredited institution. That because of these educational qualifications, as well as formal training required by DSHS, individuals hired into these two positions qualified as "learned professionals" exempt from FLSA overtime protection.

In 2005, the DOL issued an opinion letter stating that social worker positions that required "a master's degree in social work, drug and alcohol, education, counseling, psychology, or criminal justice," were "learned professionals" exempt from FLSA protection, while social caseworker positions that required only "a bachelor's degree in social sciences" were not. In 2006, the Department of Labor (DOL) received a complaint from a DSHS employee. After an investigation, the DOL investigator concluded that the social worker 2 and social worker 3 positions were not "learned professionals" exempt from FLSA overtime protection and thus workers in these positions were entitled to overtime pay.

On a DSHS appeal, the district court disagreed with the DOL investigator's conclusion, and held the social worker 2 and social worker 3 positions were "learned professionals" exempt from FLSA overtime protection. The district court stated that the DSHS's requirements were "plainly more exacting than a bachelor's degree in 'any field' as stated in 29 [C.F.R] § 541.301(d), and more exacting than the caseworker's requirements outlined in the Department of Labor's 2005 opinion letter." The district court also concluded that DSHS's requirement that social workers have at least 18 months of experience in social work and that they be required to complete additional formal training weighed in favor of a finding of specialized training. Summary judgment was entered for DSHS. The DOL appealed.

The FLSA includes an exemption from the overtime requirement for "any employee employed in a bona fide executive, administrative, or professional capacity . . . ." 29 U.S.C. § 213(a)(1). To qualify as a "Learned Professional" an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. This primary duty test includes three elements:

1. The employee must perform work requiring advanced knowledge;
2. The advanced knowledge must be in a field of science or learning; and
3. The advanced knowledge must be customarily acquired by a prolonged course of specialization where specialized academic training is a standard prerequisite for entrance into the profession.

"An employer who claims an exemption from the FLSA bears the burden of demonstrating that such an exemption applies." Klem, 208 F.3d at 1089. "The criteria provided by regulations are absolute and the employer must prove that any particular employee meets every requirement before the employee will be deprived of the protection of the Act." Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1125 (9th Cir. 2002) (quoting Mitchell v. Williams, 420 F.2d 67, 69 (8th Cir. 1969)

The Ninth Circuit noted that in the 2005 opinion letter, the DOL stated that social worker positions that required "a master's degree in social work, drug and alcohol, education, counseling, psychology, or criminal justice," were "learned professionals" exempt from FLSA protection, while social caseworker positions that required only "a bachelor's degree in social sciences" were not. That while the DSHS's requirement that the social worker 2 and social worker 3 positions required more than a degree "in any field," it did not require a "prolonged course of specialized intellectual study." DSHS's educational requirement may be satisfied by degrees in diverse fields. DSHS also admitted it does not examine an applicant's coursework once it determines that the applicant's degree is within one of those fields. Furthermore, that the DSHS required both positions to participate in a formal training program is not relevant as the regulation states clearly that the FLSA exemption does not apply to "occupations in which most employees have acquired their skill by experience." 29 C.F.R.§ 541.301(d).

Continue reading "Social Workers Are Not Exempt as "Learned Professionals" Under FLSA" »

Clincy et al. v. Galardi South Enterprises Inc., No. 1:09-CV-02082-RWS (N.D. Georgia, September 7, 2011)

One of the questions before the court is whether exotic dancers are independent contractors or employees, entitled to minimum wages and overtime under the Fair Labor Standards Act (FLSA).

Each of the Plaintiffs performed as a dancer/entertainer (DE) at Club Onyx. Galardi South Enterprises Inc. is owned by Jack Galardi, who also owns Pony Tail, Inc. and Galardi South Enterprises Consulting, Inc. Pony Tail leases the premises where Onyx is located and admits to owning and controlling Onyx.

Onyx employs a management team that handles the club's day-to-day operations. House moms assist the entertainers. Part of the house mom duties include directly managing a DE, including her appearance, signing her in for her shifts, and explaining how a DE is required to pay the disc jockey and a bar fee.

When hired, a DE at Onyx is given a "Dancer Packet" which contains forms to review, complete and return to management. The packet includes 1) Onyx's Club Rules and Conduct for Contractors and Employees; 2) conduct rules for the VIP Rooms; 3) a Dancer Information Sheet; 4) a Random Drug Test Consent Form; 5) an Independent Contractor Agreement; 6) a document entitled "Wage Acknowledgment Regarding `Tip Credit'" and 7) Rules Recognition and Consent.

A DE is responsible for obtaining an individual adult entertainment license specific to Onyx from the City of Atlanta, where the club is located, and paying the annual cost to maintain an adult entertainment license. A DE is also asked to attend separate meetings to discuss Onyx's rules and policies, changes in City law, promotional events and Onyx's decoration and furnishings. Though there is no concrete rule as to the minimum number of nights a DE must work each week, if a DE does not work four nights a week, she is fined or disciplined. A DE must also call her House moms if she cannot perform on a work day.

The FLSA defines an "employee" as "any individual employed by an employer." 29 U.S.C. § 203(e)(1). The economic realities of the relationship between the worker and the boss determines whether a worker is an independent contractor or an employee.

The court reviewed six factors to determine the economic reality relationship between the plaintiffs and defendants.

1. The nature and degree of the alleged employer's control as to the manner in which the work is to be performed. The court finds Onyx exerts control over nearly every aspect of a DE's work from hire to termination.

2. The alleged employee's opportunity for profit or loss depending upon his managerial skill. The court finds Onyx is primarily responsible for drawing customers into the club, which determines a DE's earnings and Onyx's revenue.

3. The alleged employee's investment in equipment or materials required for his task, or his employment of workers. The court finds a DE's investment in exotic dancing is small in comparison to Onyx's investment.

4. Whether the service rendered requires a special skill, which is indicative of an independent contractor. The court finds that special skills are not required to perform as a DE at Onyx.

5. The degree of permanency and duration of the working relationship. The court finds most of the plaintiffs have worked less than a year for Onyx. This is not indicative of an employer-employee relationship.

6. The extent to which the service rendered is an integral part of the alleged employer's business. The court finds the presence of a DE was integral to Onyx and weighs in favor of finding an employer-employee relationship.

The court concludes that the economic reality relationship between the plaintiffs and defendants is such that plaintiffs are employees of Onyx and entitled to minimum wages and overtime as decreed by the FLSA. The court grants plaintiffs' motion for partial summary judgment and deny defendants' cross motion for summary judgment.

This decision is significant as the majority of strip clubs in the country, including Las Vegas, disregard court decisions that hold most strippers, employed under circumstances similar to those in the case, are actually employees.

Continue reading "Exotic Dancers Are Employees Entitled to Minimum Wages and Overtime" »

A Nevada lobbyist, accused of embezzling from his former partners, has filed a $180 million business lawsuit countersuit.

In 2004, F. Harvey Whittemore, a Nevada lobbyist, and an entity his family owed, sold 50% of their ownership in various companies to several entities owned by Thomas Seeno, a California developer. In 2005, Whittemore and Seeno transferred all their interests in these entities to two new entities - Wingfield Nevada Group Holding Company LLC and The Foothills at Wingfield, LLCs. In 2007, Seeno's son, Albert D. Seeno, Jr., bought a part of Whittemore's interest in Wingfield. The three men then executed an agreement appointing each of them as co-managers of Wingfield. The agreement also required any transactions over $5 thousand to be approved by all three owners.

In the fall of 2010, the Seenos noticed discrepancies in Whittemore's financial records. After they confronted him, Whittemore admitted and signed a written "confession" regarding his malfeasance. The "confession" stated, among other malfeasances, that
Whittemore had misappropriated Wingfield money for personal use, improper financial dealings, extra compensation, and political donations. Whittemore also acknowledged that he diverted Wingfield investment money and other company assets for his own personal use.

The Seenos, as co-owners of the new entities, filed a business litigation lawsuit on behalf of the new entities against Whittemore, his wife Annette, and various other entities that profited or may have profited from Whittemore's malfeasance. The suit, filed in the District Court of Clark County, Nevada in January 2012 alleges Whittemore engaged in a breach of his fiduciary duties, fraudulent concealment, civil conspiracy, breach of contract, tortuous breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, and intentional interference with prospective economic advantage.

Last week, Whittemore and his wife Annette filed a counter business lawsuit against the Seenos claiming the Seenos "are associated with organized crime networks, have associated with and are associating with known felons and are currently, along with the Doe defendants, under investigation by the FBI and IRS, and were raided by agents of the FBI, IRS, and the Secret Service." Whittemore also claims the Seenos are intentionally devaluing the assets of the new entities.

Whittemore also acknowledges that he has transferred personal assets to the Seenos, but claims the transfers were because the Seenos threatened Whittemore, his wife, and family with intimidation and bodily harm, and not because he is guilty of embezzlement, fraud, or any other criminal activity. The Whittemores demand punitive damages of $180 million for racketeering, contract, fraud, conspiracy and conversion.

The FBI is now investigating whether Whittemore funneled thousands of dollars in illegal campaign contributions through his family and business employees.

Continue reading "Nevada Lobbyist Files a Business Litigation Countersuit against Former Business Partners" »

The Las Vegas District Attorney has formally charged a Clark County first grade teacher with a DUI. Noel Lardeo is charged with a Class B felony of driving and being in actual physical control while under the influence of intoxicating liquor causing death and/or substantial bodily harm to the victim. The charges include one count of driving under the influence of alcohol resulting in substantial bodily harm; one count of failure to stop at an intersection; one count of no registration in vehicle; two counts of no driver's license in possession; and one count of open container in vehicle while driving.

On February 5, 2012, Lardeo lost control of her car and struck a 15-year-old boy sitting on a nearby bus bench. According to witnesses, Lardeo hit the boy after speeding through a red light. After the Las Vegas Metropolitan police arrived, a police officer observed two open, partially consumed containers of vodka in Lardeo's car. Lardeo was then administered four field sobriety tests with Lardeo's consent.

On the Horizontal Gaze Nystagmus Test, six out of six clues indicated Lardeo was impaired. On the Wall-and-Turn Test, four of eight clues suggested Lardeo was impaired. On the One-Leg Stand Test, two out of four clues indicated Lardeo was impaired. Lardeo then failed a preliminary breath test. Though the complaint only states Lardeo's Blood Alcohol Content was at least .08% or more. Lardeo told the police that she had not consumed any alcohol since the night before the accident, and a low front tire caused her to lose control of her car.

The boy struck by Lardeo was critically injured; has had one leg amputated, and is still in critical condition. Neither Lardeo, nor her passenger, were injured in the accident.

Under Nevada law, for a first DUI offense in Las Vegas, punishment can include:
• 2 days to 6 months in jail OR 24 to 96 hours of community service with a suspended jail sentence of up to 6 months.
• a fine of $400 to $1000, plus court costs.
• 8 hours of DUI school at the driver's own expense.
• mandatory attendance at a Nevada Victim Impact Panel.
• a suspension of your driver's license for 90 days, though a restricted driver's license allowing driving to and from work or in the course of employment can be applied for after 45 days of the suspension has passed.
• installation of an "ignition interlock device" for 3 to 6 months and/or submission to alcohol abuse assessment, if the BAC is .18% or higher.
If a second DUI offense occurs in Las Vegas within 7 years of the first DUI conviction, punishment can include:
• 10 days to 6 months in jail.
• a fine of $750 to $1000, plus court costs.
• 1-200 hours of community service.
• mandatory attendance at a Nevada Victim Impact Panel.
• a suspension of your driver's license for 1 year.
• an Alcohol Assessment Evaluation.
• installation of an "ignition interlock device" for 12 to 36 months and treatment in an alcohol abuse program, if the BAC is .18% or higher.
If a third or more offense occurs within 7 years of the first DUI conviction, the DUI conviction becomes a felony, instead of a misdemeanor for the first two offenses, and punishment can include:
• 1 to 6 years in jail.
• a fine of $2-$5,000, plus court costs.
• mandatory attendance at a Nevada Victim Impact Panel.
• a revocation of one's driver's license for 3 years or more.
• an Alcohol Assessment Evaluation.
• an "ignition interlock device" for 12 to 36 months and treatment in an alcohol abuse program.

When a suspected drunk driver causes injury or death to another person, additional punishment and penalties can apply. /
Lardeo is being held without bail in the Clark County Detention Center. The preliminary hearing is set for 9 a.m. April 2 in Las Vegas Justice Court. The Clark County School District has placed Lardeo on an unpaid administrative leave. Under school district rules, a felony conviction is grounds for termination for any school district employee.

Continue reading "Las Vegas District Attorney Charges Elementary Teacher with DUI " »

In 2009, 12% of Nevada's workplace fatalities were caused by workers falling to a lower level. Under Nevada's workers' compensation statutes, employers not exempt by statute, are required to provide workers' compensation insurance to their employees for injuries they sustain in the course and scope of their employment. NRS 616C.150(1). Workers ' compensation covers medical treatment, compensation for lost work time due to temporary total or permanent disability, awards for permanent or total disability, death benefits to dependents, vocational rehabilitation, and other related expenses.

While workers' compensation has generally been awarded regardless of fault (employer or employee), the Nevada business community now wonders if a recent decision by the Nevada Supreme Court will open the door for the employee's fault to be considered as a factor in determining workers' compensation awards.

Under NRS 616A.020 exclusive remedy doctrine, in exchange for an entitlement to benefits, an employee cannot sue their employer and an employer cannot deny benefits to an employee for work-related injuries, regardless of whose fault caused the injury.

In Fitzgeralds Casino/Hotel and Cannon Cochran Management Services, Inc. versus Gary Mogg, Mogg, a security guard, injured himself when he fell over his chair while trying to put his feet on top of his desk. Fitzgerald's Casino/Hotel v. Mogg, No. 55818 (11/18/11). Fitzgeralds Casino and Cannon Cochran denied Mogg's claim for workers' compensation benefits. An appeals officer reversed the denial and awarded Mogg workers' compensation benefits.

Fitzgeralds Casino and Cannon Cochran filed an appeal of the appeals officer's decision with the District Court. The District Court upheld the appeals officer's decision. Fitzgeralds Casino and Cannon Cochran filed a further appeal with the Nevada Supreme Court raising two primary issues: 1) whether Mogg's injuries arose out of and in the scope of his employment, and 2) whether Mogg's conduct was barred by an implied prohibition against such conduct so as to avoid the application of the personal comfort doctrine.

Regarding both issues, the Nevada Supreme Court found that "injuries resulting from employment-related risks, such as a defective chair, are 'all the obvious kinds of injur[ies] that one thinks of at once as industrial injur[ies],' however "where an injury is caused by a condition personal to the employee, such as a bad knee, epilepsy, multiple sclerosis or the like, or while engaging in unreasonable personal comfort activities, compensation for such an injury is generally unavailable." Further, if the chair was not defective, was Mogg, because of his job, at an increased risk for injury, which is compensable, than the general public would be, which is not compensable. Finding no evidence from the appeal's officer to answer these questions, the Nevada Supreme Court reversed the grant of workers' compensation to Mogg and remanded the case back to the appeal's officer for further findings.

Continue reading "Nevada Supreme Court Threatens Workers' Compensation Benefits" »

Kimberley Daprizio was a dealer at Harrah's Las Vegas, which is owned by Harrah's Entertainment, Inc. Harrah's required Daprizio and other dealers to attend a short meeting before each shift. Daprizio and other dealers were not compensated for the time spent in these mandatory meetings.

Daprizio sued Harrah's Las Vegas and their parent company for violating the Fair Labor Standards Act (FLSA) and Nevada Revised Statutes (NRS), and invoked the Class Action Fairness Act (CAFA) to extend the lawsuit to any other Harrah employees who were not compensated during the previous three years. Harrah's argued that Daprizio's complaint was legally insufficient and requested the District Court to dismiss the lawsuit. Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983).

First, the District Court determined jurisdictional law. Section 216(b) of the FLSA grants jurisdiction to "any Federal or State court of competent jurisdiction." 29 U.S.C. § 216(b). The primary difference between the FLSA and Nevada state labor class action laws is the process parties use to become members of a class action suit. Under the FLSA, "No employee shall be a party plaintiff to any such action unless he gives consent in writing to become such a party and such consent is filed in the court in which such action is brought." 29 U.S.C. § 216(b). In other words, a party to the action must opt in to an FLSA collective action. Fed.R.Civ.P. 23(c)(2)(B)(v) governs other class action suits, such as Nevada state labor class action suits, and requires that any member who does not want to be part of a class action suit must opt-out.

The District Court found that because of the divergence in the opt-in and opt-out procedures the FLSA precludes state law labor class actions. The District Court also noted that if Rule 23 was applied, the 1100 California employees who did not affirmatively opt-in to the lawsuit would have been made part of the case. Finally, the District Court found that while the FLSA preempted a state class action, Daprizio still had an individual claim under Nevada state law.

Next the District Court reviewed whether the amount of time required to attend the mandatory meetings was "de minimis." In Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946), the United States Supreme Court held, "it is only when an employee is required to give up a substantial measure of his time and effort that compensable working time (which is covered by the FLSA) is involved" In Lindow v. United States, 738 F.2d 1057, 1062 (9th Cir. 1984) three requirements were identified to determine whether time was de minimis: (1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work. The District Court found the time required to attend the mandatory meetings was not de minimis.

The District Court held that Harrah's motion to dismiss the class action suit under state law was granted, but denied in regard to Daprizio's individual FLSA claim.

Continue reading "District Court Holds Class Action under Nevada State Law is Precluded by FLSA" »

In a 117 page response, one of Las Vegas' most prominent businesses, the Wynn Resorts, has asked a Clark County District Judge to throw out a lawsuit to inspect the company's financial records, brought by their largest shareholder and board member, Kazuo Okada. At question is whether Okada, who is a 19.66 percent shareholder in Wynn Resorts, brought the lawsuit as a board member or shareholder. At issue in the business litigation is a $135 million donation given by the Las Vegas business to the University of Macau in 2011. In a vote of 11-1, the Wynn Resorts approved the donation with Okada being the lone dissenting vote.

Under Nevada Revised Statute (NRS) 78.257.1, Nevada stockholders who own or control at least 15 percent of "all of the issued and outstanding shares of the stock "of a Las Vegas business have the right to "inspect, copy, and audit financial records." However, if the business has provided its stockholders with a "detailed, annual financial statement or ... filed during the preceding 12 months all reports required to be filed pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934," NRS 78.257.1 does not apply. NRS 78.257.6.

In its response to Okada's litigation, Wynn Resorts argues that they are in current compliance with all SEC filings and disclosures, and as such Okada, as a stockholder, is not entitled to review the business' financial records. Furthermore, the fact that the Wynn Resorts board was given complete information on the donation and discussed the donation prior to the board's vote, precludes Okada from filing the business litigation as a director, to circumvent Nevada's shareholder laws.

District Judge Elizabeth Gonzalez will hear arguments from both sides on February 9.

Continue reading "Are Shareholder Rights to Company's Financial Records Limited?" »

With over a million visitors to Las Vegas each year, the city of Las Vegas has hundreds of parking lots and parking structures to accommodate motor vehicles. As such, parking lot accidents are bound to occur. But when a parking lot accident occurs in Las Vegas, who exactly is liable?

In Las Vegas, business owners have the responsibility to keep their premises which include their parking lot(s), safe from causing injury. If a Las Vegas business owner does not keep their premises safe, and a personal injury, such as a car accident, occurs, the Las Vegas business owner may be liable to the injured party(ies) if the injury was reasonable and foreseeable. To be liable the Las Vegas business owner must also owe a duty of care to the injured party(ies) and the injured party(ies) must show that the business owner breached that duty of care. Injured parties which can be owed a duty of care include customers, employees, and agents.

For instance, a Las Vegas business is aware there is a hole in their parking lot. They do not cover the hole, nor do they put a barrier around the hole. On the way to their car, a customer trips in the hole and suffers injuries. First, the Las Vegas business owner owes a duty of care to this individual because they were a customer. Second, it is foreseeable that a person, such as a customer, could be injured by the parking lot hole. Therefore a court could find that it is reasonable that the Las Vegas business should have taken steps to protect persons using their parking lot from injury. Furthermore, by not taking such steps to protect their customer, the Las Vegas business could be held liable for any injuries the customer sustained.

Parking lot accidents which occur because of circumstances, such as weather, that are outside the control of the Las Vegas business owner, can preclude the Las Vegas business owner from being liable for injuries even to someone they owed a duty of care. In these circumstances, another person or even the injured party may be held liable.

For instance, a customer pulls out of a Las Vegas parking lot space without looking in both directions. The customer hits another customer walking through the parking lot or another car entering the parking lot. In these circumstances, while it is reasonable and foreseeable that car accidents will occur in the parking lot, the customers driving their cars or the pedestrian in the parking lot could be an intervening cause to exclude the Las Vegas business from liability.

Continue reading "Parking Lot Accidents - Business versus Driver(s) Liability" »

Tips are a mainstay in the service industry. According to the Nevada Department of Employment, Training and Rehabilitation, the service industry employs more individuals than any other employment category. And GOP Presidential candidate, Ron Paul, wants their vote. Paul has introduced the "Tax Free Tips Act" to exempt tips from federal and payroll taxes. A bigger question is whether any state now taxing tips, like Nevada, would follow suit.

Under the Internal Revenue Code, gross income includes "all income from whatever source derived, including ... compensation for services, including fees, commissions, fringe benefits, and similar items." Internal Revenue Code §61(a)(1). Under IRC Sections 101-140, gross income does not include such items as certain gifts, Supplemental Security income, certain health care plan contributions, death benefits, and other sources of income. Tips paid to a service industry employee are not an excludable income source; therefore they are deemed taxable gross income and subject to withholding tax.

Currently, under the Fair Labor Standards Act (FLSA) service industry employers in Las Vegas are required to deduct any applicable taxes for any service industry employee who receives $30 in tips per month. In the reverse, Las Vegas' service industry employees who receive tips are required to maintain documentation to verify how much they have earned in monthly tips, and then submit this information to their employers by the 10th of the following month. When employees do not maintain sufficient documentation to calculate their tip income, the IRS will generally assume a service industry employee's earned tip income at 8 percent of the server's food and beverage sales.

Under current FLSA and Nevada statutes, employers with tipped workers (such as wait staff, bartenders, and valets) may deduct up to $6.12 an hour as a tip credit from the minimum hourly wage paid to an employee. To qualify for the credit, an employee must earn more than $30 a month in tips. And if the total amount of an employee's hourly tips and cash wages does not equal the minimum hourly wage, a Nevada employer must compensate the employee for the difference.

For instance if during the first hour of work an employee receives $3.00 in tips and their minimum wage is $8.25, their employer must pay the employee an additional cash wage of $3.12 ($8.25 - $3.00 - $2.13). If the employee's minimum wage is $7.25, their employer must pay the employee an additional cash wage of $2.12 ($7.25 - $3.00 - $2.13). If the same employee earns $15.00 in tips during their second hour of work, their employer need only pay the employee the minimum wage of $2.13.

Continue reading "GOP Candidate Ron Paul - Tips Are Not Taxable!" »