According to the Fair Labor Standards Act (FLSA), a tipped employee is anyone who regularly receives more than $30 in tips per month. Tipped employees often work in the restaurant industry as servers or bartenders. These employees are subject to a lower minimum wage requirement than other types of employees.
Because wage disputes for tipped employees frequently arise, consult with a lawyer to make sure your payment practices are compliant with state and federal law. A lawyer will help you understand your rights and responsibilities when it comes to compensating tipped employees.What is a Tip?
A tip is a monetary payment offered by a customer to reward a person for their services. Tips are customary in restaurants, hotels, taxis and bars. Tips are generally an optional payment that a customer offers in addition to the amount paid for the services rendered.
Tips are the sole property of the employee who received them. An employer cannot use an employee's tips for any purpose other than creating a tip pool or as a calculation to ensure that the employer is not violating minimum wage requirements.Tip Credits
The FLSA allows employers to use tips as a tip credit toward the minimum wage requirement. The minimum wage for tipped employees is $2.13. Because the federal minimum wage is $7.25, the employer can count the difference between these two amounts as a tip credit. Therefore, the maximum tip credit an employer can claim is $5.12 per hour.
If an employee has more than one job function in a workplace, only one of which is tipped, the tip credit is only available for the time the employee works in the tipped position.
An employer who intends to take a tip credit must let its employees know in writing. An employer who fails to provide this information in writing is not able to claim the tip credit and must pay the employee according to federal minimum wage requirements.Tip Sharing
Valid tip sharing arrangements are permitted among employees who regularly receive tips. The employer is authorized to determine the amount or percentage of contribution on tip pools. However, the employer must provide notification of the requirement to employees and can only take a tip credit for the amount of tips the employee actually receives.Minimum Wage and Overtime Requirements for Tipped Employees
Ultimately, an employee must earn the required minimum wage, even if he or she is a tipped employee. The tip credit helps ensure that the tipped employee earns minimum wage.
Tipped employees who work more than 40 hours per week are eligible for overtime pay. The overtime pay is calculated on full minimum wage rather than the reduced minimum wage for tipped employees. Employers may not claim a larger tip credit for overtime hours.Contact Our Skilled Lawyers to Help Resolve Workplace Disputes
In industries that rely on the lower minimum wage requirements for tipped employees, minimum wage and overtime disputes often arise. Employers may have poor recordkeeping practices. Some unscrupulous employers fail to ensure that their employees receive sufficient tips to meet minimum wage requirements. If you have concerns related to the compensation requirements for tipped employees, contact an attorney at Mays & Kerr to learn more about your rights and obligations. We help employers avoid potential disputes and ensure that employees receive the compensation to which they are entitled.