Minimum Wages For Workers

Federal law provides for the following:

• $7.25 per hour minimum wage for non-tipped workers
• $2.13 per hour minimum wage for tipped workers, $5.12 tip credit to make up the employee’s wage to an average of $7.25 per hour.

Conditions Necessary To Qualify As Tips

1. Voluntary payments by customers: Customers must have given the money willingly without being mandated. If there is any form of compulsion, the gesture ceases to qualify as tips and is a service charge.
2. Unrestricted right of customers to determine the amount: To qualify as tips, the amount must not be fixed or pre-determined. It just has to come willingly from the customer.
3. The amount should not be set by employer, policy or subject to negotiation with the employer: The amount to be given as tips should not be stipulated or predetermined.
4. Employers, managers, and non-tipped workers are not allowed to share from any  tip pool. Employees must be permitted to keep all tips even if the employer does not take the tip credit.
5. The employer must give proper notice and post required information from the U.S. Department of Labor.

Differences Between Tips And Service Charges

Mandatory service charges paid by the customer are not tips. This is because service charges are not voluntary and not given to the person the customer interacts with. Although the employer has a choice to share the service charge with the employee, he or she is not under any obligation to do so, and the employee has no legal right to claim such service charges.

Employer’s Obligations

For an employer to invoke the Tip Credit to satisfy its minimum wage obligations, the employer must satisfy the following:

1. Employer must make tipped workers aware of the cash wage paid and tip credit to be taken before the work is performed.
2. Employer must make tipped workers aware of any tip pooling arrangements at the workplace in advance.

Tip Pooling or “Tipping Out”

A “tip pool” is a system where tips are pooled and shared. It is generally legal under the FLSA when employees sharing tips interact with customers, i.e. front-of-the-house employees. A tip pool is improper and can violate the FLSA when back-of-the-house employees or managers are included.  An improper tip pool can negate the tip credit subject the employer to liability for the entire minimum wage and require repayment of all amounts withheld, i.e., kickbacks. Of course, any amounts owed to the employees can be doubled as liquidated damages.

Complexity Of Calculating The Wages Of A Tipped Worker

Among all other minimum wages set by the Fair Labor Standards Act and other similar laws governing workers’ wages, the provisions for tipped workers can be complex. The law provides for a wage as low as  $2.13 per hour minimum wage for tipped workers. Additionally, there’s a maximum $5.12 tip credit to make up the employees’ wage to an average of $7.25 per hour.

At DeLong, Caldwell, Bridgers, Fitzpatrick & Benjamin, LLC, we will help you ensure that you earn as much as the law requires. Our case evaluation analyzes every situation and makes it easier to point you towards the best option to take. Morally and legally, you are entitled to a minimum wage. At DeLong, Caldwell, Bridgers, Fitzpatrick & Benjamin, LLC, we will help you recover minimum and overtime wages, and all entitlements due to you. We have decades of experience working for workers and employees, including but not limited to tipped worker wages in Georgia. Call now for a free consultation.