What should restaurant workers know about tip credits and pooling?
Like the rest of the workforce, restaurant workers have certain rights according to the Fair Labor Standards Act (FLSA). These laws cover tipped workers, meaning any employees who receive more than $30 per month in tips.
While it is up to employers to remain compliant with the FLSA, workers should also understand their rights. That way, you can take the proper steps to address discrepancies and ensure fair treatment.
Tipped workers must at least receive the hourly federal minimum wage of $7.25. However, if the amount of tips is sufficient, employers can pay them the cash wage of $2.13. The amount of tips a worker receives must be equal to or over the federal minimum wage when combined with the cash wage.
While employers cannot claim any of the worker’s tips, as they are the property of the worker, they can claim a tip credit. Tip credits allow the employer to claim a portion of the tips of a worker to meet their obligations to provide the minimum wage. On the federal level, the maximum credit amount allowed is $5.12 per hour, which is the cash wage deducted from the federal minimum wage.
Tip pooling involves collecting tips and dispersing them between workers who are customarily tipped (meaning those who earn more than $30 in tips per month). This usually includes waitstaff, service personnel, and bartenders. The tip pool cannot include workers who do not customarily receive tips, such as kitchen staff paid the federal minimum wage or higher.
If a worker does not earn the federal minimum wage through their tipped cash wages, the employer must make up the difference. Employers cannot deduct money from a worker’s wages for things like walk-outs or broken equipment if those deductions decrease the person’s wage below the federal minimum.
Tipped workers are also afforded overtime pay when applicable. In this case, workers must receive overtime pay based on the federal minimum wage and not their cash wage.