Complying with Tip Pooling and Tip Credits under the FLSA

Author: Hans Associates: Stephen D. Hans
Queens, NY Employment Defense Attorneys

The U.S. Department of Labor (DOL) changed its rules about tipped employees when applying the Fair Labor Standards Act (FLSA). The DOL has provided a fact sheet  clarifying how you must apply the rules.

Some of the highlights are that restaurants may no longer include all employees in tip pooling. They can only include the employees who traditionally received tips such as servers, bartenders and employees who directly serve customers. Other employees such as cooks, dishwashers, chefs and restaurant maintenance personnel cannot be included in tip pools.

Another FSLA clarification is tip credits. A tip credit is a credit that the employer takes toward minimum wage requirements. In contrast with the minimum wages for tipped workers, which is $2.13, the federal minimum wage requirement is $7.25 per hour. However, workers’ tips must at least provide them with the minimum wage total amount of $7.25. Therefore, the difference between the minimum tipped wage of $2.13 and regular worker’s minimum wage of $7.25 is $5.12. The $5.12 amount is the maximum tip credit that employers can claim under the FLSA.

The FSLA imposes other obligations on employers before allowing them to count tip credits which include complying with tip pooling restrictions, paying tipped employees $2.13/hr, not counting tip credits that exceed amounts that tipped employees actually make and that the employer must inform the tipped employees of these provisions before applying tip credits.

Restaurant owners who violate the FLSA can end up with serious legal issues. A seasoned New York employment defense lawyer can help you ensure compliance and protect your interests.

Hans & Associates, P.C.  has helped small and medium-sized business owners throughout New York City for more than 30 years.

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