How Tipping Employees Affects the Minimum Wage

British Columbia restaurateur David Jones recently made news when he announced his newest restaurant would have a “no tipping policy,” in what is believed to be a first for Canada. Jones plans to pay his servers a fixed percentage of gross sales instead of using customer gratuities to offset minimum hourly wages. Although some high-end U.S. restaurants have moved to abolish tipping, it remains the common practice in North America.

Most restaurants in Florida and the United States are small businesses. Federal and state labor laws allow employers to “credit” employee tips against the statutory minimum wage. But employers must be careful in how they treat tipped employees to avoid legal complications.

How Much Is the Minimum Wage?

The Fair Labor Standards Act establishes a federal minimum wage of $7.25 per hour. With respect to “tipped employees,” an employer may credit up to $5.12 per hour for actual tips received, meaning the employer need only pay a cash minimum wage of $2.13 per hour.

Florida imposes a higher minimum wage than the FLSA. The Florida Constitution requires an upward adjustment of the minimum wage each year to account for inflation. As of January 1, 2014, the Florida minimum wage is $7.93. Employers may credit up to $3.02 per for tips received. That means Florida employers must still pay a cash minimum wage of $4.91 per hour, more than double the federal requirement.

Who Is Considered a “Tipped Employee”

An employer may only claim credit for a “tipped employee,” which the FLSA defines as “those who customarily and regularly receive more than $30 per month in tips.” The same standard applies under the Florida minimum wage.

But what about an employee who does more than one job? Let’s say a person works part-time as a waiter and part-time as a maintenance worker for the same restaurant. Maintenance workers are typically not tipped employees. In such cases, the employer may only claim credit against the minimum wage for the hours the employee works as a waiter.

This is why it is essential for employers to clearly define employee functions. A waiter who does incidental maintenance work, such as washing dishes, may still be considered a “tipped employee” for minimum wage credit purposes, provided no more than 20% of their work is spent doing traditionally non-tip-producing functions.

Who Controls Tips?

Tips are the property of employees, period. An employee cannot be required to turn over any tips received to his or her employer. It does not matter whether or not the employer claims a tip credit against the minimum wage. For example, a Florida employer cannot pay a waiter the (non-credit) minimum wage of $7.93 per hour in exchange for receiving a portion of the employee’s tips.

Employees, however, may pool and share tips. A server may, for instance, give a portion of his or her tips to a busboy. An employer must notify an employee of any required tip pooling. And as always, the tips remain the property of the recipient. The employer must only claim a minimum wage credit for those tips each employee actually receives.

Complying With the Law

Minimum wage laws are just one of many labor regulations a Florida small business must comply with on a daily basis. In order to keep up with legal developments, it’s important to retain an experienced Florida business attorney. Contact attorney John S. Sarrett in Naples today if you have any questions.

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