The Fair Labor Standards Act (FLSA) establishes wage and hour protections for workers across the United States. It sets minimum wage, overtime pay, and child labor standards. The law also includes specific regulations for tipped employees to ensure they receive fair compensation. Employers must follow these rules to avoid wage violations and protect workers’ rights.
Defining a tipped employee under the FLSA
The FLSA considers an employee “tipped” if they regularly receive more than $30 per month in tips. Common tipped professions include servers, bartenders, and hotel staff. While tips contribute to their earnings, employers must still meet minimum wage requirements through a combination of direct wages and tips.
The tip credit and minimum wage obligations
Federal law allows employers to claim a “tip credit,” which lets them pay tipped workers less than the standard minimum wage, as long as tips make up the difference. The federal minimum wage is $7.25 per hour, but employers can pay as little as $2.13 per hour if tips bring total earnings to at least $7.25. If an employee’s combined wages and tips fall short, the employer must cover the gap.
Rules for tip pooling and sharing
The FLSA permits tip pooling, where employees share tips among eligible workers. Employers cannot keep tips for themselves or share them with managers and supervisors. Tip pools must benefit employees who customarily receive tips, such as servers and bartenders, rather than back-of-house staff like cooks or dishwashers unless the employer pays full minimum wage without using a tip credit.
Employers must inform workers about tip credit rules, maintain accurate records of tips, and ensure employees receive at least the federal minimum wage. Violations can lead to legal action, including back pay and penalties. Understanding these regulations helps workers protect their earnings and hold employers accountable.