It’s been three years since the U.S. Department of Labor (DOL) announced their “We Can Help” nationwide initiative, which placed a special emphasis on rooting out wage and hour violations in such industries as construction, janitorial work, hotel/motel services, food services and home health care. Unfortunately, from what I’ve seen in the news, it appears all too many employers haven’t yet received the memo. All too many continue to be tripped up by wage and hour violations.
One big area of confusion is the “tip credit.” Under the terms of the Fair Labor Standards Act (FLSA), when you have employees who customarily receive tips, you may be allowed to take a tip credit against the normal minimum wage and overtime pay you would normally be required to pay.
The FLSA says you can take a tip credit of $5.12 per hour for those customarily tipped employees. In other words, you can pay tipped employees a minimum wage of $2.13 an hour, instead of the normal $7.25 per hour minimum. Of course, if the employee’s tips plus the $2.13 an hour you pay them doesn’t total up to at least $7.25 an hour, you also have to make up the difference. Under no account can an employee make less than $7.25 an hour, whether from wages alone or a combination of wages and tips.
(Note: Some states have more restrictive laws, and if that’s the case, you should obey the law of your state. So you’d be well-advised to check with your employment law attorney to make sure you’re complying with all the laws that apply in your jurisdiction.)
What You Need to Know Before Claiming a Tip Credit
Here are a few tips to help you avoid trouble if you have tipped employees and decide to take advantage of the tip credit: