Are You A Tipped Employee? Understanding The FLSA And Tipping Laws

Are you a tipped employee and do not understand the laws for tipped employees? You are not alone. There are tipping laws that are governed by the Fair Labor Standards Act (FLSA), protecting tipped employees who regularly receive more than $30 in tips on a monthly basis.

Maduff & Maduff, LLC wants to help you to better understand your rights when it comes to tipping. Here are the basic tipping laws, and what they may mean to you:

Tip Credit 

While tips received are considered the sole property of the tipped employee, with the exception of tip pooling, many employers may factor tips into their wage obligation, which is called a tip credit.

In order for employers to use the tip credit, they must provide the employee with the following information:

  • The total wages the employer is paying
  • The amount your employer will credit against tips
  • Notification that the tip credit will not exceed the value of tips received
  • Notification that the tip credit can only be used if the employee has been informed of the FLSA’s tip credit rules
  • Notification that all tips received must be retained by the employee, except when collected for a valid tip pool

Employers who fail to provide the tipped employee with the above information, either written or orally, must pay the tipped employee the federal minimum wage, as well as allow them to retain all tips received.

Tip Pooling

The FLSA will allow tip pooling arrangements among service employees who regularly receive tips. However, tipped employees are not required to pool tips amongst employees who do not normally receive tips, like cooks and dishwashers.

There is no maximum amount or percentage of tips for a valid mandatory tip pool, but employers must notify tipped employees of any tip pool contribution requirements, and cannot retain tips for any other reason.

Tips and Credit Cards

When customers pay their tip using their credit card, employers will incur a 3 percent fee for each credit card transaction, allowing them to recoup the portion of this fee applicable to an employee’s tip. For example, assuming a 3 percent fee, the FLSA permits an employer to pay the tipped employee 97 cents of a $1.00 tip if it is charged on a credit card.

Keep in mind, the employee is entitled to payment of tips charged on credit cards on or before the regular pay day, and cannot be withheld while the employer is waiting for reimbursement.

Tipped Employees And Non-tipped Duties

Tipped employees often work non-tipped duties for part of their shift, such as cleaning, folding napkins, prepping food, etc. The FLSA allows employers to use the tip credit for time spent doing these tasks, even though the employee is not generating tips.

In these scenarios, the employee is considered a tipped employee. However, employers may not use the tip credit when the tipped employee spends more than 20 percent of their time doing these duties.

If you are a tipped employee and have questions or concerns related to the tipping laws and the FLSA, contact the employment attorneys at Maduff & Maduff today.