Fair Labor Standards Act: Tipped Employees

Tipped employees are defined by the Fair Labor Standards Act (FLSA) as workers who “customarily and regularly receive more than $30 per month in tips.” Tips are the property of the employee and the employer may not use an employee’s tips for any reason other than as part of a valid tip pool or to count the tip income as a credit against the obligation to pay minimum wage. This is referred to as a “tip credit.” 

Only tips that an employee actually receives may be counted when making a determination regarding whether the worker is a tipped employee and whether the tipped credit should be applied to reduce an employer’s minimum wage obligation. Employers must provide notice to an employee of their rights and must be able to show that each employee receives at least minimum wages, otherwise the employer may be in violation of labor laws and the worker can take legal action. An experienced Boston employment lawyer at Jeffrey Glassman Injury Lawyer can help if you believe your employer has violated FLSA rules for tipped employees.

According to the Fair Labor Standards Act, employers must provide written notice to tipped employees of five key facts. To use the tip credit and pay less than $7.25 per hour, an employer must notify workers in writing:

• How much the employer will pay in cash wages. The employer is required to pay at least $2.13 per hour.
• The additional amount the employer is claiming as a tip credit. This cannot exceed the difference between $2.13 per hour and the current minimum wage.
• That the tip credit cannot exceed the number of tips received.
• That the tips received are all to be retained by the employee. The only exception is when tips are collected for a valid tipping pool among employees who customarily and regularly pool tips.
• That the tipped credit applies only if an employee has received this information.

The law also makes clear that if an employee is both a tipped employee and does non-tipped work, an employer can apply the tipped credit for some of the time spent performing work not directly related to generating tips as long as the employee does not spend more than 20 percent of his time doing un-tipped work. For example, a waiter who does dishes occasionally can still be considered a tipped employee and the tip credit can be taken against time spent doing dishes.

Unfortunately, the rules for tipped employees can create situations where employers fail to live up to their obligations under state and federal labor laws. The Fair Labor Standards Act identifies several common problems that can arise in an employment relationship with a tipped employee including:

• When an employee doesn’t receive sufficient tips to make up the difference between his direct cash wage payments and minimum wage.
• When an employer pays no cash wage and offers an employee payment in tips only.
• When there are deductions taken from a worker’s pay for walk-outs, cash register shortages or breakage that reduce the employee’s wages to below minimum wage.
• When employees are required to commit to a tipped pool that shares the money among workers who don’t customarily and regularly receive tips.
• When overtime is not paid as required.

In these and other situations, you may be entitled to receive the money that your employer unfairly denied you. Laws in Massachusetts also allow employees to receive treble damages when an employer has violated labor laws.

If you are a tipped employee who has been treated unfairly by your employer or who has not received money you are owed, our team at the Jeffrey Glassman Injury Lawyers can help. Give us a call or contact us online today to learn more about how we can assist with your case.