Minimum Wage Tipped Workers

A tip is wage according to the Fair Labor Standard Act (FLSA). You are a tipped employee - that's for example a waitress or bellboy - if you receive regularly and customarily more than $30 a month in tip. If so, your employer is only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the federal minimum wage of $7,25 per hour.

Your employer can only do that if you are informed about the tip credit allowance, if your employer is able to show that you earn at least the minimum wage when direct wage and tip are combined and allows you to retain all tips. 

When you are subject to both the federal and state wage laws you are entitled to the provisions of each law which provide the greater benefits.

When you don't receive sufficient tips to make up the difference between the cash wage of at least $2.13 per hour and the minimum wage of at least $7.25, your employer must make up the difference.

If you get only tips and you don't get paid the cash wage of at least $2.13 you must earn the full minimum wage of at least $7.25.

Retention of Tips

A tip is the sole property of the tipped worker regardless of whether the employer takes a tip credit. The FSLA prohibits any arrangement whereby any part of the received tip becomes the property of the employer! This rule does not apply however if there is a valid tip pooling or sharing arrangement among tipped workers - see below.

Tip Pooling

As noted above: as a tipped worker you cannot retain all tips if there is a valid tip pooling or sharing arrangement among workers who customarily and regularly receive tips. The FLSA does not impose a maximum contribution amount or percentage on valid mandatory tip pools. Your employer however, must inform you about any required tip pool contribution amount and may only take a tip credit for the amount of tips each tipped worker ultimately receives, and may not retain any of the workers' tips for any other purpose.

When you are required as a tipped worker to contribute to a tip pool that includes workers who do not customarily and regularly receive tips, you are owed all tips that you have contributed to the pool and the full minimum wage of $7.25.

Working in both a tipped and non-tipped occupation

If you are employed in both a tipped and a non-tipped occupation the tip credit is only available for the hours spent in the tipped occupation. However, the FLSA permits an employer to take the tip credit for some time that tipped workers spends in jobs related to tipped work, even though such duties are not producing tips. For example a waitress who spends some times cleaning and setting the tables, and occasionally washing dishes is considered to be engaged in a tipped occupation. However when you as a tipped worker spend over 20 percent of your workweek in a non-tipped occupation, no tip credit may be taken for the time spent in such duties. 

Tips on Credit Cards

Your employer must pay credit companies a percentage of each sale, so when your tips are charged on a credit card, your employer may pay you your tip, less the percentage of the credit card company. However, this charge on your tip may not reduce your wage below the required minimum wage. The amount due must be paid to you no later than the regular pay day and may not be held while your employer is awaiting reimbursement form the credit card company. 

New Rules Paying Tipped Workers

The U.S. Labor Department issued new regulations for the Fair Labor Standards Act (FLSA) that affect tipped workers. These regulations became affective on May 5. The FSLA now requires employers taking advantage of the federal tip credit - maximum of $5.12 per hour - to inform a tipped worker about:
  • the amount of cash wage the tipped worker is receiving directly from the employer;
  • the additional amount the employer is using as a credit against tips received;
  • that the tip credit may not exceed the actual amount of tips they receive;
  • that the tipped worker must be able to keep all received tips except for contributions to a valid tip pool;
  • that the tip credit may not be taken unless the the tipped worker has been informed of the tip credit requirements.
 
While this notification is not required in writing, it is recommended that the employer do so. An Employer who fails to provide the required information cannot use tip credit provisions and therefore must pay the tipped employee at least $7.25 per hour in wages and allow the tipped worker to keep all tips received. 

Service Charges are NO TIP!

A compulsory charge for service is not a tip. Such charges - e.g. 15% of the bill - are part of your employer's gross receipts and may be used to satisfy your employer's minimum wage and overtime obligations under the FLSA. 

Tipped Workers: Your overtime pay can never be less than your minimum wage!

File a Complaint

Contact your local Wage and Hour Division office, or call the program's toll-free help line at 1-866-4USWAGE (1-866-487-9243) to get more information about how to file a complaint. In addition, you may file a private suit, generally for the previous two years of back pay (three years in the case of a willful violation) and an equal amount as liquidated damages, plus attorney's fees and court costs, according to the U.S. Department of Labor.

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