By Jesse Brar
The Minimum wage for tipped employees must be at least the federally mandated $7.25 per hour minimum wage. However, for tipped employees, like those working as bartenders, waiters/waitresses, and valets, the issue is more difficult. A tipped employee is one who is regularly paid more than $30 in tips each month. An employer is required to pay tipped employees the minimum wage, but they may factor in the employee’s tips.
Based on the federally mandated $7.25 per hour minimum wage, tipped employees are entitled to an employer-paid wage of at least $2.13 per hour. However, they are entitled to more than $2.13 if their received tips do not average $5.12 per hour. The employer can claim a “tip credit” against the federal minimum wage. In order for employees to determine whether they are receiving the proper wage, the Fair Labor Standards Act requires employers to provide tipped employees with the following information:
· The wage paid by the employer (at least $2.13 per hour)
· The amount the employer will credit against tips
· Notification that the tip credit will not be greater than the value of tips received
· Notification that the employee can only claim the tip credit if they have been informed of the Fair Labor Standards Act tip credit rules
· Notification that, except for tip pools, all tips must be kept by the employee
The employer can inform the tipped employees of their rights either orally or in writing. If an employer fails to inform his or her tipped employees, then the employer must pay all tipped employees minimum wage and allow them to keep all the tips they earned. If the employees’ tips and employer-paid wages do not equal the minimum wage, then the employer must pay the difference as well.
The Fair Labor Standards Act does allow employees to share tips, also known as tip pooling. However, tipped employees cannot be forced to pool tips with other employees that do not normally receive tips, like cooks and dishwashers. Generally, the tip pooling practice occurs with waiters pooling their tips with bartenders and bussers, so that the pooled tips may be evenly divided at the end of each shift. The employer is required to notify tipped employees if there are any tip pooling requirements. Furthermore, they may not retain the tipped employees’ tips for any other reason.
One other small wrinkle involves the payment of tips by credit card, which is particularly relevant with the increased usage of credit cards today. The average credit card transaction incurs approximately 3% fee. As a result, the Fair Labor Standards Act allows an employer to recoup a portion of the fee from the employees’ credit card tips. For example, if an employee receives a tip via credit card which has a 3% fee, then the employer may pay the employee 97 cents for each dollar of the tip. However, employees are still entitled to those credit card tips either on or before the regular payday.
If at any time you suspect you may not have been treated appropriately under the law, get in contact with an attorney who works on these cases to share your story and understand your rights.