Wage Laws for Tipped Employees
Do you work for tips? Are you paid less than minimum wage? If yes, you may be the victim of illegal wage theft. We are lawyers who have recovered millions in owed wages and compensation for restaurant servers, bartenders, dancers, and other tipped employees like you.
You may be owed money for violations of the tip credit laws if:
- Your employer makes you be in a tip pool or tip share with managers or other employees who rarely interact with customers;
- Your employer makes you pay for uniforms, customer walkouts, cash shortages, broken glasses, excessive credit card fees, or security expenses;
- Your employer requires you to perform work unrelated to your tipped job – like cleaning bathrooms, preparing food, or mopping floors – or requires you to spend more than 20% of your time on non-tipped “side work”;
- Your employer fails to pay you the minimum federal, state, or Chicago hourly wage in addition to your tips; or
- Your employer makes you attend meetings, perform training, or do other work without being clocked in (“off the clock” work).
If you experienced any of the above treatment at a current or former employer, you may need to act fast to recover your owed minimum wages and penalties.
Minimum Wage And Overtime Laws For Servers And Tipped Employees
Special rules apply to the minimum wages and overtime that must be paid to employees working as tipped employees. If you work as a tipped employee, as a server, waiter, bartender or busboy, your employer must follow a specific set of rules and regulations. Tipped employees in both fine and casual dining restaurants, often are not paid the minimum wages or overtime pay the law requires. When this happens, you should find and contact the best lawyer possible who is experienced in representing tipped employees.
Some of the illegal practices employers use to avoid paying servers and tipped employees their owed wages include:
Non-Tipped Work and Excessive Amounts of Non-Tipped Work/Dual Jobs
It may be illegal to require a tipped employee to perform non-tipped work while paying that employee the sub-minimum sever wage. When an employee performs both tipped and non-tipped job duties, the sub-minimum wage tip credit rate is available only for the hours spent for work performed in the tipped occupation.
For example, an employer may require tipped employees to spend hours cleaning, sweeping, mopping, washing dishes, rolling silverware and even cleaning bathrooms. When such non-tipped work is performed, or where tipped employees spend more than 20 percent of their time performing general preparation work, maintenance, opening or closing duties, no tip credit may be taken for the time spent in such duties. Instead, the full minimum wage should be paid to the employer. Where a substantial amount of time is spent by tipped employees performing non-tipped work, the employer may lose or forfeit the tip credit and the tipped employees may be entitled to receive the full cash minimum wage for all time worked.
Retention of Tips
When an employee is paid less than the minimum wage – that is, paid a tipped credit rate – the law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. A tip is the sole property of the tipped employee. Thus, the restaurant cannot keep part of a server’s tips. Where an employer does not strictly observe the tip credit provisions of the FLSA, no tip credit may be claimed and the employee is entitled to receive the full cash minimum wage for all time worked.
The requirement that an employee must retain all tips allows tip splitting or tip pooling arrangements only among employees who customarily and regularly receive tips such as waiters, waitresses, servers, bellhops, counter personnel (who serve customers), busboys/girls and service bartenders. Tipped employees may not be required to share their tips with non-tipped employees, for example with dishwashers, cooks, expediters, chefs and janitors. Where non-tipped employees participate or are included in the tip pool, the employer loses or forfeits the tip credit and the employee is entitled to receive the full cash minimum wage for all time worked.
Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee’s wage below the required minimum wage and may not exceed the amount actually charged by the credit card company. The amount due to the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.
A compulsory service charge, for example, 15 percent of the bill, is not a tip. Such charges are part of the employer’s gross receipts. Where service charges are imposed and the employee receives no tips, the employer may be required to pay the entire minimum wage and overtime required by the FLSA.
Meeting, Set Up, or Clean Up Time
Many companies require tipped employees to come to work early or stay late for meetings or to perform opening and closing job duties. Even though these workers cannot make any tips during this time, these hours are paid at the tip credit rate. This may be illegal and employees are entitled to be paid the full minimum wage for such work time.
Prerequisites to Taking the Tip Credit
If an employer elects to use the tip credit provision the employer must:
- Inform each tipped employee about the tip credit allowance (including the amount to be credited) before the credit is utilized;
- Be able to show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined;
- Allow the tipped employee to retain all tips, whether or not the employer elects to take a tip credit for tips received, except to the extent the employee participates in a valid tip pooling arrangement.
If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the minimum hourly wage — $7.25 an hour effective 7/24/09 — the employer must make up the difference.
*** Important Note*** Many state laws have tip credit laws that are stricter than the federal FLSA. For example, the State of Illinois requires employers to pay 60% of the applicable Illinois minimum wage of $9.25 per hour. Effective January 1, 2020, the tip credit rate in Illinois is at least $5.55 per hour. City and County ordinances may set even higher minimum wage rates for tipped employees.