Five Truths About Tipping

1. Managers and owners have no right to tips.

FLSA prohibits any arrangement between the employer and the tipped employee where any part of the tip received becomes the property of the employer. For example, even where a tipped employee receives at least $7.25 per hour in wages directly from the employer, the employee may not be required to turn over his or her tips to the employer. So, a restaurant that makes wait staff relinquish a cut of their tips to “the house” at the end of the night is likely in violation of the law.

2. Back-of-house staff (BOH) can’t participate in a tip pool.

The Department of Labor mandates tip pooling in an effort to protect servers.
BOH is excluded because of “tip credits.” These credits that let restaurant owners count tips toward their servers’ wages. Tip credits may not be applied to cooks, dishwashers, runners, or hosts; these individuals must be paid the full minimum wage. Therefore, tip pools are reserved for those who are customarily tipped, because they are customarily paid below the minimum.

3. Overtime for servers making $2.13 is NOT $3.20.

A common error is when servers work overtime and get paid time and half calculated from the lowest allowable pay based on minimum wage, $2.13. Employers are only allowed a maximum tip credit of $5.11, and overtime is based on time and a half from minimum wage, not $2.13.

4. Dual Jobs

When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as an employee employed both as a maintenance person and a waitperson, the tip credit is available only for the hours spent by the employee in the tipped occupation.

The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip producing.

However, where a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.

5. Tipping has been controversial in American history.

Seven states outlawed tipping in the beginning of the 20th century. This movement may have prevailed except for one event: Prohibition. During Prohibition, restaurateurs suffered greatly. Tips helped them offset losses from liquor sales. By 1926, all of the states had repealed anti-tipping laws.

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