Tip Regulations under the FLSA
With recent changes to Florida’s minimum wage laws, it’s fair for employees who rely on tips to wonder, can your employer keep your tips? The rules regarding the calculation of your wages in coordination with your tips can cause confusion.
We are ready to help. Our experienced employment lawyers deal regularly with situations regarding how employers handle tips for their employees. We know how to ensure your employer treats you fairly. Call Feldman Law Group at 877-946-8293 today.
What Do the New Regulations Mean for Tipped Employees in Florida?
First, some background. Employers in Florida must pay their employees a wage at least equal to the minimum wage. To start 2021, Florida’s regular minimum wage rate increased to $8.65 per hour. This was higher than the federal minimum wage of $7.25 per hour at the time. (The Florida minimum wage will increase to $10 per hour by September 2021.)
Some employees fit the definition of a tipped employee, which federal regulations define as employees who derive at least $30 of their wages each month from tips. Employers can pay these tipped employees less than minimum wage as a base wage. However, they then must ensure the employees collect enough in tips to make up the difference.
If the Florida employee doesn’t meet the minimum of $8.65 per hour between base wages and tips, the employer must make up the difference with additional base wages.
Minimum Base Wages Versus Tips
At the start of 2021 in Florida, the minimum base wage is $5.63 for a tipped employee. By September 2021, the minimum base wage will increase to $6.98 (to accommodate the increase in the regular minimum wage to $10 per hour). In both cases, an employee would need to make tips equal to at least $3.02 per hour to reach the regular Florida minimum wage amount.
This $3.02 amount is called a tip credit. If the employee’s tips are less than $3.02 per hour in a pay period, regulations require the employer to make up the difference by increasing the base wage.
On the other hand, some employers might seek to keep any tips that the employee earned that would push the combined wages over the minimum wage amount. Under the regulations, employers cannot keep any of these tips. The employee should receive all of the tips and the minimum base wage.
Understanding Tip Pools
In a tip pool, the employer collects all tips that all of the tipped employees make. The employer then distributes an equal amount from all of the collected tips to each employee.
This benefits the employer, ensuring that all employees reach the tip credit. If one tipped employee only makes $2 in tips per hour and the other one makes $5 in tips per hour, the employer may deploy a tip pool.
Each employee then would receive $3.50 in tips per hour, surpassing the $3.02 tip credit requirement. The employer doesn’t have to make up the difference, as it would if one employee only made $2 per hour in tips.
A tip pool is legal under certain circumstances, depending on whether the employer takes the tip credit.
- No Tip Credit Taken: If the employer pays all employees at least $8.65 per hour in a base wage at the start of 2021 (and $10 per hour by September 2021), including servers, the employer is not participating in the tip credit. This means employees who don’t normally receive tips, such as dishwashers and cooks, can participate in the tip pool.
- Tip Credit Taken: When the employer makes use of the tip credit to pay employees, those employees who don’t normally receive tips cannot be part of the tip pool under updated DOL regulations.
Updated Department of Labor Rules for Tipped Employees
Under the Fair Labor Standards Act (FLSA) from the U.S. Department of Labor, employers must follow certain laws regarding wages for tipped employees. The DOL has new regulations in the works for employees who receive tips.
These regulations had an original effective date of March 1, 2021. However, the DOL announced delays. The new regulations include the following.
Enacted Regulations for Tipped Employees
The portions of the new rules that became effective April 30, 2021, include:
- Keeping of Tips: The new rules prohibit employers, managers, or supervisors from permanently keeping the tips of employees for any reason.
- Tip Pooling: The new rules force employers that create a tip pool to distribute the monies from the pool as frequently as they pay standard wages. Failing to make a timely distribution could fit the definition of illegally keeping the tips.
- Recordkeeping: The rules force employers to implement new recordkeeping techniques when they collect for a tip pool, even if they do not take a tip credit. Additionally, the employer must identify the employees who typically receive tips when completing payroll records.
- Non-Tipped Workers: Employers who take a tip credit may not include non-tipped workers in a tip pool.
Delayed Regulations for Tipped Employees
At this point, the delayed regulations have a scheduled effective date of Dec. 31, 2021. They include:
- Civil Money Penalties: The rules spell out any penalties an employer could receive for violating these updated FLSA regulations.
- FLSA Tip Credit: The employer must follow new regulations when calculating the tip credit for an employee who performs both tipped and non-tipped duties.
- 80/20 Rule: Under the 80/20 rule, a tipped worker could spend no more than 20% of his or her time performing non-tipped duties. Under the proposed rules, an employee who works in a position that normally receives tips across the industry would qualify as a tipped employee. The 80/20 rule will no longer be valid.
How Does Amendment 2 Affect Tipped Employees?
More changes are on the way for tipped employees. Florida voters passed Amendment 2 in November 2020, which will increase the state’s minimum wage to $15 per hour by 2026 through a stepping stone process. In September 2021, the minimum wage climbs to $10 per hour from $8.65.
The tip credit of $3.02 will remain in place as the overall minimum wage amount climbs. When the minimum wage goes to $10 per hour, the base wage for tipped employees will increase to $6.98 per hour with the $3.02 difference encompassed in the tip credit.
Let Us Represent Your Interests
If you believe your employer is not following Florida guidelines for paying you as a tipped employee, the Feldman Law Group is ready to help. Our experienced employment attorneys are up to date on all of the new regulations regarding laws for tipped Florida employees.
We are ready to answer any of your questions, such as, can your employer keep your tips, and can your employer implement a tip pool. Contact us today at 877-946-8293.
Common Questions About Employment Law for Tipped Employees
Our employment law attorneys know these new DOL rules can create significant confusion for tipped employees. Here are some of the most common questions we receive on this topic.
Can Your Employer Hold Your Tips?
Legally, your employer holds your tips temporarily under certain circumstances. Ultimately, the tips belong to the employee, though.
The employer may hold onto the tips when the employer is making use of the tip credit scenario. The employer must calculate the tips the employees received to be able to report the tip credit amount correctly. While performing these calculations, the employer may hold the tips temporarily.
After completing the calculations, though, the employer needs to pay the employee the tips in a reasonable period of time, usually by the next pay period.
Can an Employer Keep Credit Card Tips?
When patrons pay the bill with a credit card, they often leave the tip as part of the credit card payment. The employer must treat these credit cards tips the same way it treats any other tips.
The employer keeps credit card tips temporarily while performing calculations, but it must give the money to the employee in a reasonable amount of time. The employer cannot hold the tips paid with credit card until receiving the money from the credit card company, for example.
In some states, including Florida, companies can reduce the amount of the employee’s credit card tip by the percentage the company must pay to the credit card processor. If the employee receives a $10 tip and the credit card processor charges 3% of the total amount of the transaction, the company could reduce the tip the employee receives by 3% of $10, or $0.30.
Can Your Manager Claim Your Tips?
Under regulations, supervisors and managers should not participate in a tip pool. No supervisor or manager claims your tips legally. This money belongs to the employee, even if the company holds the tips for a short period of time while performing calculations for the tip credit.
However, the regulations give companies quite a bit of leeway in defining a supervisor. If assistant managers sometimes help customers, it’s possible they could share in a tip pool under the regulations.
As mentioned earlier, if the company claims a tip credit, only employees who work in a position that normally receives regular tips may participate in a tip pool. In this case, a manager or assistant manager should not be part of the tip pool.
Count on Our Team to Represent Your Interests
With the new Department of Labor rules regarding tipped employees and regarding minimum wage in Florida, employees may believe employers are treating them unfairly. Should you suspect your employer is not following the new rules, you have the right to seek the compensation owed to you.
The Feldman Law Group is ready to represent your interests. We take pride in helping employees receive the fair treatment they deserve. We understand how frustrating it can be to feel as if your employer is mistreating you.
Call us at 877-946-8293 as soon as possible. We will be ready to begin representing your interests against your employer as soon as you choose to hire us.