If you are an employee who earns tips, your pay will be figured out differently. Under the Fair Labor Standards Act (FLSA), if you regularly make more than $30 per month in tips, you are covered by a minimum wage rule that is different from other employees who don’t earn tips. For instance, in the hospitality industry, your employer must pay you at least $7.50 per hour and may take a “tip credit” for the amount of money between the tip minimum wage and the regular minimum wage. The total is currently a tip credit of $1.50, since the regular minimum wage is $9.00. The credit is the amount of money your employer does NOT have to pay you if you make up the amount through tips. If you do not earn enough tips in a pay period to make up the difference between the tip minimum wage of $7.50 and the regular employee minimum wage of $9.00, your employer must pay you the difference.
In New York, the amount that employers can pay to their tipped hourly employees depends on their job, but the base amount, plus the tips, must equal the state’s regular minimum wage.
Tips belong to you and not to your employer or anyone else unless all the tipped employees create a “tip pool” (putting their tips together and splitting them). Non-tipped employees may not share in the tip pool.
There are many problems that can come up with tip income. For example:
- You put your tips into a tip pool and find out that your employer is giving some of the money to non-tipped employees.
- When a customer walks out on a bill without paying, your employer takes that money out of your paycheck. Then at the end of a pay period, your combined minimum wage plus tips come out to less than the regular minimum wage.
- Your employer lets customers use credit cards but won’t pay you for credit card tips until the credit card company pays the bill, even though it is after your next, regularly scheduled pay check.
- Your employer deducts the 3% credit card fee from your credit card tips; this leaves your combined wage and tip income below the minimum wage. Your employer does not pay you the difference.
- Your employer makes you to spend a shift decorating the restaurant for the holidays; he pays you the minimum tip wage for this period and takes the full tip credit, even though you earned no tips during that shift.
- Your employer keeps an “error account,” where you have to put in a percentage of your tips to cover mistakes you might make. This violates the rule that tips are solely your property.
Legal Editor: Steven Mitchell Sack, January 2015
Updated: January 2016
Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.