Tipped + Minimum Wage

Minimum Wage Workers

Under Federal law all workers are entitled to at least minimum wage of $7.25 per hour. Many states and cities have local laws that have a higher minimum wage.  Failure to pay minimum wage still take place.

TIPPED EMPLOYEES AND MINIMUM WAGE WORKERS

If you are a tipped employee, you need to be sure that you are still receiving at least minimum wage, pursuant to the Fair Labor Standards Act (“FLSA”). This does not mean that you must be paid minimum wage as your salary. However, the combined total of your salary and tips must equal at least minimum wage.

What is a “tipped employee”?
According to the Department of Labor (“DOL”), the federal Fair Labor Standards Act (“FLSA”) permits an employer to pay a tipped employee a direct wage of $2.13 per hour, as long as the employee’s tips are sufficient to raise his or her hourly wage to the federal minimum of $7.25. The FLSA defines “tipped employees” as those engaged in occupations in which they “customarily and regularly” receive more than $30 a month in tips. These include waitstaff, bussers, and bartenders.

[Please NOTE: Minimum wage may vary by state, so be sure to check what the minimum wage is in your state. To determine this, the following link may be helpful www.dol.gov/esa/minwage/america.htm]

What is my wage as a “tipped employee”? 
To determine your wage as a tipped employee, the amount you are paid by your employer will be considered to be increased on account of tips, by an amount determined by the employer. 29 U.S.C. § 203(m). However, this amount cannot exceed 50% of the applicable minimum wage rate. Id . In other words, the amount your employer can increase your salary through tips is limited to half the current minimum wage. Also, the amount of the increase on account of tips determined by the employer cannot exceed the amount of tips you actually received. Id .

Example 1: 
As of June 1, 2007 , the federal minimum wage is $5.15. If you qualify as a tipped employee, your employer may pay you a regular wage of no lower than $2.13 per hour. However, you must then make what totals $3.02 per hour in tips. If you worked a forty hour work week, you would earn approximately $206.00 at $5.15 per hour. If you are a tipped employee, you may be paid as little as $85.20 for forty hours of work at $2.13 per hour. However, you must then earn at least $120.80 in tips during that forty hour period in addition to the $85.20 you were paid was part of your wages. If you make less than $120.80 in tips, you are not being paid the minimum wage and may be entitled to back pay at the full $5.15 per hour.

What is the Employer’s Responsibilities
Importantly, your employer may be required to inform you that your hourly wage is being decreased by an amount to be made up for in tips. If the employer cannot show that it has informed the employee that tips are being credited against their wages, then no tip credit can be taken and employer is liable for full minimum wage.

If an employer elects to use the tip credit provision the employer must:

An agreement between an employer and his employees that tips should be kept by the employees as compensation for services may be sufficient to count the tips as part of the minimum wage, even if the employees were not required to account to the employer for tips they received.

The law does not allow any arrangement between the employer and the tipped employee that results in any part of the tip received becoming the property of the employer. A tip is the sole property of the tipped employee.

If an employee feels they are being shortchanged by the employer, the FLSA permits them to seek a re-determination by the DOL. Id.

What if a tipped employees performs non-tipped work?

In some cases, you may be eligible for full minimum wage for job duties that are not related to waiting tables.  In its Field Operations Handbook (“DOL Handbook”), the DOL states that if a tipped employee spends more than 20% of his or her time performing non-tipped work, the employer may not take the tip credit for that time. Therefore, according to the DOL, if a waiter spent 25% of his time one day cleaning, the employer would be required to pay the full minimum wage for the time spent cleaning and could only apply the tip credit to the rest of his time.  Courts have held that assigning a tipped employee non-tipped duties to be performed for a substantial, distinct period of time, such as before opening or after closing, may remove those duties from being incidental to the employee’s tipped duties, in which case the employee would be entitled to the full minimum wage during that time.

Tip Pools
The requirement that an employee must retain all tips does not prevent tip splitting or pooling arrangements among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), busboys/girls and service bartenders. Tipped employees may not be required to share their tips with employees who have not customarily and regularly participated in tip pooling arrangements, such as dishwashers, cooks, chefs, and janitors. Only those tips that are in excess of tips used for the tip credit may be taken for a pool. Tipped employees cannot be required to contribute a greater percentage of their tips than is customary and reasonable.

If you pool your tips, be sure that all employees sharing in the tips are properly tipped employees. For example, a salad maker is generally not validly categorized as a “tipped employee” and thus cannot legally share in the tip pool.

What it if my tip is charged on a credit card?
Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage.

This charge on the tip may not reduce the employee’s wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.