The employer must provide the following information to a tipped employee before the employer may use the tip credit:
The employer may provide oral or written notice to its tipped employees informing them of items 1 – 5 above. An employer who fails to provide the required information cannot use the tip credit provisions and, therefore, must pay the tipped employee at least $7.25 per hour in wages (under federal law) and allow the tipped employee to keep all tips received.
Employers can require tipped workers to participate in a tip pool. However, the tip pool can only consist of employees who customarily and regularly receive tips such as waiters, waitresses, bussers, bartenders, and barbacks. The tip pool cannot include those who do not customarily and regularly receive tips such as dishwashers, cooks, chefs, janitors, bouncers, and managers. If non-tipped employees are included in the tip pool, this destroys the ability of the employer to take the tip credit and the employee would be entitled to the full minimum wage, and not just the tip credit.
When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as an employee employed both as a cook and a waiter, the tip credit is available only for the hours spent by the employee in the tipped occupation. The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip-producing. However, when a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.
Employers electing to use the tip credit provision must be able to show that tipped employees receive at least the minimum wage when cash wages and the tip credit amount are combined. If an employee’s tips combined with the employer’s direct (or cash) wages of at least $2.13 per hour/$5.54 in Florida do not equal the minimum hourly wage, the employer must make up the difference.
Employers electing to use the tip credit must still pay overtime to employees that work over 40 hours in a workweek. This overtime wage payable by the employer must be at least 1.5 times the minimum wage minus the allowable tip credit.
Employers often deduct monies from the payroll of tipped employees for broken dishes or when customers skip out on their bills. Forcing the tipped employee to pay for these items often takes their pay below allowable tip credit and is a violation.
As noted above, The Fair Labor Standards Act requires the employer to pay the employee at least the minimum wage for the applicable tip credit. Often, employers will allow an employee to work for only tips, and the employee is not paid any wages from the employer. This is a violation of the Fair Labor Standards Act and would entitle the tipped employee to the full minimum wage plus an equal amount of liquidated damages.
