Tipping Issues
The Fair Labor Standards Act (FLSA) governs tipping. Preliminarily, all employers must pay employees the minimum wage of $7.25 an hour. However, an employer may credit earnings from tips towards the minimum wage up to $5.12 an hour. In the event tipped employees’ tips carry them over the minimum wage, the employer may only have to pay a wage of $2.13 per hour. However, an employee’s wage may not drop below $7.25 per hour.
When can an employer treat an employee as a "tipped employee?"
An employer may count an employee as a tipped employee when that employee “customarily and regularly” receives more than $30.00 a month in tips.
What is considered a tip? To whom do tips belong?
A tip is an amount given by the customer in gratuity, meaning a tip represents extra payment outside of the service provided. Tips solely belong to the employee. An employer may use a tipping pool, about which the employer must notify tipped employees if used.
What is a tipping pool?
Tips may be pooled and distributed to tipped employees (this does not include managers) so long as the employer pays the employee the minimum wage. Further, the employer may credit tips paid out via a pool towards the minimum wage of its employees. An employer may require employees to participate in tip pooling.
Example: Waiters and busboys may split the tips from a table.
What are some prohibited tipping pool practices?
Some prohibited tipping pool practices include:
- Paying less than minimum wage ($7.25/hr);
- Employer keeping tips;
- Requiring employees to contribute more than allowed by law; and
- Sharing pooled tips with employees who are not tipped employees (i.e. managers).
If an employer includes employees in the tip pool who should not be there, the tip credit is lost, often resulting in substantial claims unpaid wages.
Prohibited tipping practices:
Some prohibited tipping practices include:
- An employer may not keep any portion of an employees’ tips, regardless of whether the employer takes a tip credit.
- Failing to inform employees the employer intends to utilize the tip credit.
- Failing to explain the tip pool if the tip pool is utilized
Tipping problems? Contact me.
The laws and regulations concerning tipped employees are complex and often not intuitive. If you think that your employer has not paid your tips to you properly, contact me, a Houston employment attorney to schedule a consultation.