Idaho Law Blog
During my work as an employment law attorney I often have employers ask whether the Fair Labor Standards Act (FLSA) applies to those employees they have who receive and are paid through tips. The purpose of this post is to identify and describe the requirements of the FLSA to employees who receive tips.
According to the United State Department of Labor,
“Tipped employees are those who customarily and regularly receive more than $30 per month in tips. Tips are the property of the employee. The employer is prohibited from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool. Only tips actually received by the employee may be counted in determining whether the employee is a tipped employee and in applying the tip credit.”
A portion of the FLSA permits an employer to take a “tip credit” toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. Thus, the maximum tip credit that an employer can currently claim under the FLSA is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13).
Before an employer can use the tip credit the employer must provide the following information to a tipped employee:
- the amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;
- the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25);
- that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
- that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
- that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.
According to the United States Department of Labor, “an employer may provide oral or written notice to its tipped employees informing them of items 1-5 above.” It’s important to note that an employer who fails to provide the required notice cannot use the tip credit provisions. When this is eliminated the employer must pay the tipped employee at least $7.25 per hour in wages and allow the tipped employee to keep all tips received.
If you are an employer and you elect to use the tip credit you also required to show that tipped employees receives at least the minimum wage when direct (or cash) wages and the tip credit amount are combined. Under any circumstance where an employee’s tips combined with the employer’s direct (or cash) wages of at least $2.13 per hour do not equal the minimum hourly wage of $7.25 per hour, the employer must make up the difference.
If you are an employee or an employer and you have questions about tips or the tip credit, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Employment Law attorneys in Idaho. You can also email Lane Erickson directly at lve@racinelaw.net. We will answer your Idaho Employment Law questions and will help you solve your Idaho Employment Law problems.
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