TIPPED EMPLOYEES AND MINIMUM WAGE REQUIREMENT
Normally, tipped employees are paid an hourly wage plus a portion of all tips received during their shift. According to the U.S. Department of Labor, Wage and Hour Division, tipped employees are those who “customarily and regularly receive more than $30 per month in tips.”
What is “tip credit”? The following information is taken directly from the U.S. Department of Labor’s website. Section 3(m) of the Fair Labor Standards Act permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage and the federal minimum wage. Therefore, the maximum tip credit that an employer can currently claim under the FLSA is $5.12 per hour (the federal minimum wage of $7.25 minus the federal minimum required cash wage of $2.13). What this basically means is that the employer can take a credit against paying the employee the full minimum wage by using the amount of tips the employee receives during his or her shift.
If the equation looks like this, the employer is complying with the FLSA:
hourly wage paid by employer + amount of tips employee receives = minimum wage per hour.
The FLSA goes on to say “the employer is prohibited from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool.”
What is a “tip pool”? The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers and service bartenders. A valid tip pool may NOT include employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs and janitors.
Certain tipped employees, such as a server in a restaurant, often have to put a portion of their tips in a tip pool at the end of their shift and pay a portion of the tips they have received to the bar staff or busser who clears their tables. Only tips the employee actually receives count against the minimum wage requirement. For example, if a server ends a shift with $75.00 in tips but provides the bar staff with $10.00 for the tip pool and the wait staff bussing tables with $5.00 for the tip pool, only $60.00 of that server’s tips count against the minimum wage requirement.
Why is this important? Employers electing to use the tip credit provision must be able to show that tipped employees receive at least the minimum wage when direct (or cash) wages and the tip credit are combined. Meaning, if the employee’s tips combined with the employer’s direct (or cash) wages of at least $2.13 per hour do not equal the minimum wage, the employer must make up the difference.
Other minimum wage problems include:
1) When an employee is paid only in tips and receives no cash wage, the employer must pay the employee the full minimum wage.
2) Where deductions for walkouts, breakages or cash register shortages reduce the employee’s wages below the minimum wage, such deductions are illegal. Example: when a customer fails to pay a bill at a restaurant.
3) Where an employee contributes to a tip pool that includes employees who do not customarily and regularly receive tips, the employee is owed all tips he or she contributed to the pool and the full $7.25 minimum wage.
For more information, please visit the U.S. Department of Labor’s website, where this information was obtained.
This is an interesting article on new taxes imposed by the IRS on tips for waiters and waitresses.
If you need a wage and hour attorney, please call The Friedmann Firm today.
Rachel was absolutely amazing. As an attorney she really took the time to really listen to my concerns. She was honest and kept me informed every step of the way. The outcome was favorable on my behalf and I appreciate her efforts to achieve a good outcome. I would highly recommend her and the Friedmann firm to represent me if ever needed in future.
Working with Rachel Sabo from Friedmann Firm was absolutely amazing! She upholds integrity, honesty and without a doubt fights for what is right! Rachel was extremely transparent and real! Please don’t let wrong be right, Rachel will strive to advocate and put her whole heart in obtaining resolve in your situation! What an absolute blessing, she won my case in less than 1 week💪
My experience with the Friedmann Firm is an absolute 5 stars. From my very first call with Karen, to all of my communication with Rachel, everything exceeded all of my expectations. Rachel and Karen were so caring and understanding in a very sensitive situation. They responded immediately to any questions or concerns I had. I would HIGHLY recommend the Friedmann Firm. They are caring, professional, understanding, and I would trust them with any issue I have in the future.
Rachel and the Friedmann Firm were fantastic to work with. The thought of needing an employment lawyer was scary for me, it was confusing and complex. But Rachel listened, asked questions and took time to really understand me and my priorities. I felt calm, supported and excited for the first time in weeks after talking to her!! We worked together to review everything, set expectations and meet my priorities! Thanks Rachel and team for all your work!!!
Rachel Friedmann of the Friedman Firm was my attorney for a very recent legal matter. I would highly recommend Rachel based on her legal knowledge, her honest appraisal of the matter and expected outcomes, her open communication and timely responses to my questions and the matter itself, and her steadfastness in dealing with the opposing counsel until a final agreement was reached.
Rachel and her staff went over and above the call of duty to help me achieve fiscal resolution to my legal issue. She wasn’t always available to talk but was always responsive via text and email when in court out of the office and even on vacation. I feel she earned her percentage cut.
Couldn’t be happier with the representation I received from Jamie Bailey on my civil litigation case. She worked tirelessly to resolve the case and in the end negotiated a fair settlement on my behalf. I would highly recommend her to anyone! Thanks for everything Friedman law firm.
Friedman Firm was a great help in a difficult time in my life. They went above and beyond to get me back on track. Rachel was so good to work with and is extremely knowledgeable about the law and employment rights. Can't thank them enough for all there hard work. Highly recommend them to anyone.
The Friedmann Firm (specifically Pete Friedmann) represented me through what seemed like a never ending employment discrimination suit. The suit was filed just before Covid shut everything down in 2020. Add to that a former employer who refused to admit fault. In spite of all of that, Pete stood resolute in his representation of me and working for the best outcome for me. We ended up settling prior to trial and I was more than satisfied with the results. Pete was always available to answer questions and reassure me throughout this process. I highly recommend The Friedmann Firm!
Pete Friedmann and his firm are fantastic. He represented me for more than a year going through a suit with a previous employer. He walked me through every step of the process and was always quick to respond to any questions I had. My settlement came in and we parted ways with both sides being pleased with the outcome. I highly recommend the Friedmann firm and wouldn’t hesitate to use them again in the future if the need arose. Thank you, Pete!
Rachel and the Friedmann Firm have been amazing to work with. Rachel was very helpful, listened to our concerns and took our case. She communicated well throughout and really worked for us. We were very well represented!
I loved working with The Friedmann Firm. Rachel and Jamie are exceptional lawyers and were diligent in reviewing my case and letting me know of my options. Jamie was extremely thorough and handled even the smallest details of my case with ease. The entire process was seamless and they were always quick to respond to emails and calls. I would definitely recommend working with The Friedmann Firm.
I would recommend Rachel Sabo Friedmann and the Friedmann firm for severance negotiations. Rachel was always available and responsive and made an effort to ensure I was updated on every step of the process. Her diligent efforts produced a prompt resolution and we are very happy with the results!