The Complex Nature of Paying Tipped Employees

Most employers and employees do not fully understand the laws regarding how to properly pay tipped employees because this is a very complex area of law.  The Fair Labor Standards Act (FLSA) mandates that the vast majority of American employees must be paid minimum wage by employers.  However, the FLSA carves out specific exceptions.  One exception is for tipped employees.  The FLSA allows employers to pay tipped employees as little as $2.13 an hour, provided that the employees meets certain requirements and the employers follows strict guidelines.  For example, an employee may only be considered a tipped employee if the employee is one that customarily and regularly receives tips.  Most of the time, a non-customer facing employee is not considered a tipped employee and must be paid the applicable minimum wage, which is at least $7.25 an hour.

Also, tips belong to the employee, not the employer.  However, although an employer cannot takes tips from a employee, an employer may force an employee to participate in a valid tip pool.  The FLSA has rigid guidelines about when an employer can force employees to participate in a tip pool.  These requirements include mandates on the maximum percentage an employer can require an employee to give to a tip pool, who can participate in a pool, and how the tip pool is structured.  Tip pool violations carry hefty penalties for employers.  Employer and employees should seek legal advice on whether the tip pool is valid.

Tipped employees are often paid incorrectly.  When an employer makes a mistake in this area, the employer often owes every affected employee (1) lost wages, (2) liquidated damages in the amount of double the lost wages, (3) and applicable attorney fees.  Normally, an employee can claim unpaid wages for the two year period immediately preceding the claim.  However, if the employer was acting willfully, an employer may be entitled to seek damages for the three year period immediately preceding the claim.  Thus, damages can add up quickly.

Employers should be careful to audit their wage policies and ensure that their employment practices comply with applicable state and federal wage laws.  Employees should also take steps to understand whether they are being paid correctly.  Stacy Cole Law, P.C. assists both employees and employers in claims for unpaid wages.



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