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Understanding Minimum Wage for Tipped Employees


You may be aware that with some exceptions, employees generally must be paid minimum wage (and then extra for any overtime the employee worked). The Fair Labor Standards Act (FLSA) allows an employee who has not been paid the proper amount, to sue for significant damages against an employer who shorts the employee pay.

But what about tipped employees? Certainly, tipped employees can make way more than minimum wage when accounting for tips. Does the employer still have to pay the employee minimum wage, even though the employee is collecting tips?

Paying Tipped Employees

The answer to this question is “no”—with some requirements. Tipped employees only need to be paid $2.13 per hour. The employer gets a “credit” for the difference between this amount and minimum wage, because of the employee’s credits (no matter how much the employee actually collects in tips).

However, for many years, the FLSA only allowed the employer to get that credit—that is, to pay $2.13-if the employee spent 80% of their time or more doing tipped work. If, for example, an employee worked as a cook—a non-tipped position—and every now and then, bussed tables—a tipped position—the employee would need to be paid the full minimum wage. This is sometimes known as the 80/20 rule.

But the 80/20 rule is set to change, allowing the employer to pay $2.13 if the tipped employee does both tipped and non-tipped work at the same time or immediately before or after each other. The good news is that this will now avoid having to track how much time an employee does tipped or non-tipped work. The bad news is that this new regulation may be as confusing as the old regulation, and likely will need interpretation by courts.

Tipping Pools

In some cases, businesses may set up a tipping pool. Although the regulations related to tip pooling are complex, as a general rule, a tip pool cannot be shared by tipped and non-tipped employees. For example, at a hotel, a valet and a house cleaner could be included in the same tipping pool, since they are both traditionally tipped. However, a valet and a desk clerk could not, a desk clerk not being an employee that is normally tipped.

Additionally, any employee that is a supervisor or manager, may not participate in (that is, get any part of) any money put into a tip pool.

Note that when we say that an employee can’t be included in a tip pool, it means that if the employee is included in the tip pool, the employer does not get the benefit of being able to pay $2.13. In other words, if, hypothetically, a business paid every single worker, even tipped employees, the legal minimum wage, then it doesn’t matter who participates in the tip pool.

Has your employer paid you less than what you were supposed to earn? Are you worried about how to stay out of trouble? Let our West Palm Beach employment law attorneys at Pike & Lustig, LLP help you if you have a problem. Call us at 561-291-8298 to get a consultation.




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