Explaining Tip Credits

Tipping is a way of life in the United States, where many service industry workers rely almost completely on tips to pay their bills. However, wage and hour laws become a little more complex for employees who regularly earn tips, as the rules about what counts as a tip and even your legal rights may change a bit.

Of course, tipping laws vary from state to state. In Florida, for example, tips are the “sole property” of the employee; it doesn’t matter if their employer takes a tip credit. The Fair Labor Standards Act (FLSA) makes it illegal for the employer and employee to make any sort of arrangement where the employee must share their tips with the employer.

However, there’s something called tip credits, too. Tip credits are essentially a cut in minimum wage with the expectation that tips will make up for the difference. If the employee doesn’t make enough in tips to cover this deficit, then their employer is legally required to pay the difference.

Florida state law allows employers to claim $3.02 an hour as tip credits. Since the state minimum wage is $8.56 an hour, this means that employers can legally pay tipped employees $5.54 an hour in 2020.

What happens if a tipped employee engages in non-tippable work while working a tipped job? If the employee performs these tipped and non-tipped duties concurrently or contemporaneously (or performs the non-tipped duties shortly before the tipped work begins or after it ends), the employer can still  take a tip credit for the time they spent performing the non-tipped duties as long as so long as the duties are only “for a reasonable time” immediately before or after performing such direct-service duties.” For “waiters and waitresses”, this includes such tasks as setting up and cleaning tables and restrooms, among others.  An example that illustrates this clearly is a server who spends the last two hours of his or her shift doing work other than waiting tables, such as cleaning the restaurant, making coffee, or performing miscellaneous duties.   However, employers cannot claim tip credits for unrelated work their employees performed for them, such as running personal errands for the employer, or for any non-tipped amount of time that can be deemed to be unreasonable.  The outdated standard was a 20% of the time rule, but which has been replaced with this reasonable time standard.

What Counts As a Tip?

Generally speaking, tips are the extra money that’s left over after a bill has been paid. However, mandatory service charges or paying for the bill with a credit card may muddle this definition a little bit.

Mandatory service charges are tips that are automatically included on bills for large parties. But federal law and most state laws don’t recognize these service charges as tips, and employers can legally keep these service charges. In the law’s eyes, this is seen as a sort of a contract between the diners and the restaurant, and not necessarily a ‘thank you’ for a server’s good service. Thankfully, though, most employers give either a portion or the entirety of the service charge to their employees.

What’s more, Florida doesn’t explicitly address the topic of credit card processing fees when it comes to tipping. For the most part, employers have to pay processing fees to a credit card company, the average of which is usually around three percent. This means that employers can deduct three percent of the server’s tips on that bill paid with a credit card to make up for the processing fees.

If you believe you’ve been unfairly shorted on your tips by your employer, then you need a skilled, determined personal injury lawyer to help reclaim what’s rightfully yours. At Feldman Legal Group, we understand just how much tipped employees rely on their tips for living; to learn more about how we can best serve you, give us a call today at 813-639-9366.


Tampa Lawyer Mitch Feldman

Attorney Mitch Feldman

Attorney Mitchell Feldman, Esq. specializes in both personal injury and employment law. He is rated AV Preeminent by Martindale-Hubbell and has an Avvo rating of 10. A member of the State Bar in both Florida and Georgia, he is also admitted to practice in Federal District Courts. With several multi-million dollar victories for his clients, Mitchell Feldman has a record of success. [ Attorney Bio ]