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FLSA and tipped employees

Many Californians work in positions where they receive tips. These workers primarily work in restaurants as servers. However, since these individuals receive tips as part of their wages, there may be issues about how this income should be treated. Fortunately, state and federal laws are pretty clear, and anyone who runs astray of those laws may find themselves in the middle of heated employment law litigation.

Under the Fair Labor Standards Act, employees who receive more than $30 a month in tips are considered tipped employees. The tips these individuals receive are owned by the employees themselves. This means that an employer cannot take a share of an employee’s tips for its own income. The FLSA allows tip pooling, though, whereby tips received by all workers are pooled together and then evenly split. This is often seen in the restaurant business where tips received by servers are pooled, then split amongst the servers, cooks, dishwashers, and bartenders. Employers must notify their employees of any tip pool requirements.

One lesser known aspect of the FLSA is that it allows employers to recoup credit card fees from employees’ tips. Therefore, since many customers pay with credit cards and these cards charge a three percent user fee, under federal law employers are allowed to pay their employees 97 cents for a $1.00 tip. However, this three percent cut from a tip can only be used to reimburse a credit card fee and not for any other purpose.

Californians who believe their employer has run afoul of state or federal wage and hour laws may want to contact a legal professional. This area of the law is fraught with complexities and legalities that can be confusing. By contacting a legal professional for assistance, these individuals may be able to learn how to best handle their situation and protect their legal rights.


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