What is the tip credit?

| Oct 30, 2020 | Uncategorized |

The Fair Labor Standards Act (FLSA) is a federal law that establishes certain criteria for employers in the United States. Among other provisions, it requires employers to pay their nonexempt workers minimum wages and provide them with certain work-related benefits. The FLSA and other employment laws protect workers from abuse and ensure that they receive compensation for the tasks they perform on the job.

Not all workers and work industries are treated the same under federal employment law. For example, workers who receive tips may have different minimum wages that workers in non-tip industries. This post will discuss the tip credit and how it impacts workers’ pay; this post does not provide legal advice to its readers.

Understanding the minimum wage

The federal government has set a minimum wage that employers must pay their workers. States can establish minimum wages that are higher than the federal minimum wage, and employers in those states must pay the higher of the state or federal limit. It is important to remember that not all workers and not all employers are subject to the mandates of FLSA and the minimum wage. Before pursuing a claim based on wage and hour violations, it is important that a worker understand what laws may support their claims.

The tip credit

Workers who are employed in service industries may regularly receive tips from customers. Restaurant waitstaff, coffee shop workers, and others may be given extra money from those they serve for excellent customer experiences and service. Employers of individuals who receive tips may reduce their pay below the minimum wage and offset their wages with the tips they earn.

A tip-earning worker must make at least the minimum wage between their pay and their tips in order for the tip credit to be used by their employer. Some employers may attempt to reduce their workers’ wages using the tip credit without fully compensating them for any differences that their tips do not cover. When this happens, tipped workers may have rights to seek the compensation they rightfully earned and were wrongfully denied by their employers. Employment law attorneys can help them and support their claims.