Wage Trouble Brewing in Craft Beer Industry

But the challenge for brewers and pub owners is to avoid the kind of unpaid wages lawsuit that seems increasingly common. A Fair Labor Standards Act (FLSA) lawsuit seems to have put Pipe Dream Brewing of Londonderry, New Hampshire out of business. Pittsburgh’s Sly Fox Brewing Company was hit with similar legal action, as was Wild Heaven Craft Beers in Georgia. The allegations vary, but they include minimum wage and overtime violations, off-the-clock work, and tip problems.

The sad story of Pipe Dream Brewing may offer some lessons.

Death of a dream

Pipe Dream Brewing was founded in 2016 by two veterans, Jon Young and John Bacheller. In its heyday, it served 28 beers brewed on site. You might have sampled Adult Nuggets IPA, Cinnamon Toast Crunch Stout or Pumpkin French Toast IPA. It was the kind of place that offered “Kick it and Sip it” events that paired cardio kickboxing classes with Pipedream beer (after class).

However, workers soon began to complain that the brewery illegally kept workers’ credit card tips. There seems to have been some awkward confusion of service fees and tips, which are very different. In addition, non-tipped workers, including brewers, bartenders, cooks and administrative staff complained that Pipe Dream failed to pay overtime wages.

In July 2024, after an investigation, the Department of Labor’s Wage and Hour Division recovered $912,549. This was made up of $456,297 in back wages and withheld tips and an equal amount of liquidated damages. The sum was returned to 44 Pipe Dream workers. In addition, the Wage and Hour Division assessed a fine of $5,148 for tip related violations.

Pipe Dream closed its doors in February 2025, to the dismay of its devotees.

The Fair Labor Standards Act

The FLSA requires that hourly, non-tipped wage workers must be paid at least the federal minimum wage (currently still $7.25 per hour) or the state or local minimum wage, if that is higher. New Hampshire’s minimum wage in 2024 was the same as the federal minimum wage. In addition, these workers must receive overtime pay for hours worked over 40 per workweek at a rate not less than one and one-half times the regular rate of pay. Hours worked ordinarily include all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace. Many recent wage and hour lawsuits have focused on the issue of how hours were counted.

Slightly different rules apply to tipped workers. The law defines tipped employees as those engaged in an occupation (like being a server in a restaurant or bar) where they ordinarily receive more than $30 a month in tips. 

The federal minimum wage for tipped workers is $2.13 per hour. Under certain circumstances, an employer may claim a tax credit for the difference between $7.25 and $2.13 per hour per tipped worker. To claim the credit, which is very valuable to most businesses, the employer must ensure that the employee receives enough tips from customers, and direct (or cash) wages per workweek to equal at least the $7.25 per hour and any overtime compensation that is due. Only tips actually received by the employee count when determining whether the employee is a tipped employee and in applying the tip credit. This is a complicated calculation.

How to dodge a mean legal hangover

Rule # 1: Don’t run payroll out of the cash register. Hire a payroll professional and take your questions to a lawyer.

Rule #2: Yes, you must pay the fresh and eager twenty-somethings. The same applies to your friends and even your relatives who are committed to the project. That is, unless they understand that they are strictly volunteers and should have no expectation of payment. Then, make that extra clear.

Don’t ask paid workers to do a little extra work off-the-clock. That muddles the issue of paid vs volunteer work.

Rule #3: Tips and service charges are legally different. A tip is voluntary and should go directly to the server. A service charge is mandatory; the customer must pay it. Service charges need not go to the server and are not counted toward the employer’s tip credit. The IRS treats service charges as taxable income to the business.

Craft brewing or working in a craft brew pub may still sound like exactly what you want to do. A little legal planning may go a long way to keep it from becoming a headache.