Could employer-paid health and accident insurance replace tips or meals in satisfying the minimum wage for restaurant waitresses?

Plain-English summary

A restaurant paid waitresses $1.45 per hour when the stated minimum wage was $1.65. The audit treated 20 cents per hour of tips as additional compensation needed to reach the minimum. The taxpayer argued that employer-paid health and accident insurance premiums worth more than 20 cents per hour already satisfied the requirement.

Tax counsel rejected that argument. Under the cited industrial-welfare rules, cash or its equivalent—and tips and meals only up to specified amounts—could satisfy minimum wage. Employer-paid insurance was a fringe benefit and could not be credited.

The restaurant also had posted the required notice stating that tips would be used to meet minimum wage, which undercut its position. The letter recommended denial of the petition.

Common questions

Did employer-paid insurance count as wages?

No. The source classified it as a noncreditable fringe benefit.

What evidence supported using tips for the wage gap?

The auditor reported a posted sign stating that tips would be used to satisfy minimum-wage requirements.

Was the denial recommendation final Board action?

The source does not show a later final disposition.

Citations and references

• California Administrative Code title 8, section 11380 (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-1305.pdf

Original ruling text

550.1305

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
June 4, 1971
Dear Mr. REDACTED TEXT,
This is in regard to your letter of January 11, 1971, which was accepted as a petition for redetermination of the determination dated January 6, 1971 covering the period October 1, 1967 to June 30, 1970. You protested the inclusion of tips of 20 cents per hours which the auditor deemed additional compensation necessary to bring wages up to the minimum was of $1.65 per hour. You argue that while you pay your waitresses $1.45 per hour consideration should be given to the fact that you pay all their health and accident insurance premiums, which it total amounts to more than 20 cents per hour. Thus, you contend you pay the minimum wage. We cannot accept your contention. Regulations promulgated by the Division of Industrial Welfare, Department of Industrial Relations, concerning wages, hours, and working conditions for women and minors working in the public housekeeping industry are found in Title 8 of the California Admin. Code at Section 11380. Under these regulations, only gratuities (tips) and meals, up to certain specified amounts, may be credited toward the minimum wage. The difference must be paid in cash or its equivalent directly to the employee. So-called “fringe benefits” may not be credited toward the minimum wage. Your payment of health and accident insurance premiums for your employees is a fringe benefit which may not be credit toward the minimum wage. Additionally, our auditor reports that you have posted in your premises the required sign stating that tips will be used to satisfy minimum wage requirements. This tends to negate your contention that tips are not used to meet minimum wage requirements. Based on the foregoing, I will recommend to the Board that your petition be denied. Very truly yours, Lawrence A. Augusta Tax Counsel LAA:lt