The Fair Labor Standards Act (FLSA) designates rules and regulations surrounding tips workers. It's imperative that employers abide by these regulations, or they face serious reprisal from governing entities. It's also important that tipped workers understand their rights as it pertains to their wages. This allows them to take the proper steps when any of the common problems listed below occur.
Tip pooling is a common practice where all tipped workers, which can include workers like waitstaff and bartenders, combine tips to be shared equally. While this practice is acceptable under some circumstances, workers who generally aren't tipped can't be included in the pool. For instance, a cook shouldn't be included in a tip pool arrangement since cooks often earn the minimum wage or higher. Conversely, tipped workers earn a lower wage of $2.13, which when combined with their tips must equal the federal minimum wage of $7.25 or be higher. If tip pools include traditionally non-tipped workers, employers must provide the full minimum wage as well as the allotted tips to traditionally tipped workers.
Employers may also deduct from tipped workers wages for certain occurrences. For example, a register shortage might result in an employer's request the tipped worker replaces the lost money. Deductions may also be taken out because of broken equipment or to cover the cost of uniforms and other supplies. These deductions cannot reduce the tipped worker's wages to below the federally mandated minimum wage. When they do, these deductions are deemed illegal.
Tip credits are another area of concern. Employers can take tip credits, but only a certain amount. Tip credits that exceed a tipped worker's federally mandated wage of $7.25 are not considered lawful. Additionally, tips are considered the property of the worker. As a result, employers are not allowed to request tips be turned over to them for any reason. Even with a tip pooling arrangement, tips are still the property of all workers sharing them.