Tipped Employees

Are there special rules for tipped employees?

Congress enacted an exception to the rules for calculating minimum wage for tipped employees. The federal cash wage minimum  for a tipped employee is $2.13.  (Rates may vary from state to state) An employer may credit tips to make up the rest of the minimum wage.

The tip credit the employer receives may not exceed the value of the tips the employee has actually received. If this amount fails to meet the minimum wage, the employer must make up the difference.

Employers may apply the tip credit only if:

  • An employee receives at least $30 a month in tips;
  • The employer must inform the employee of the tip credit law, the employee should received all tips earned unless the business has established a tip pool with other employees;  and
  • The employer does not keep any of the tip money earned by the employees.

If the employer is in violation of any of these conditions, a tip credit is not allowed.

Examples of tipped credit violations under the FLSA

One of the most common violations of the tip credit is when an establishment adds an automatic tip to a bill for large parties.  The employer must pay the employee the entire amount of the tip.  If they do not they are violating the tip credit provision of the FLSA.

If an employee is working two different jobs for the employer, such as a tipped waitress, or a non-tipped position such as hostess, the employer can only claim a tip credit for the hours the employee worked as a waitress. An employer cannot claim a tip credit for the hours the employee works as a hostess or any other non-tipped position.

Are there special rules for employees of hospitals and resident care facilities?

Under the FLSA,  a hospital employee or resident care facility employee may receive overtime pay after 80 hours worked in a two week period as opposed to receiving overtime pay after 40 hours worked on a one week period.  The employee must be informed of this prior to working overtime.

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Donald Fohrman
Donald W. Fohrman & Associates, Ltd.