Daniel.Tan | May 4, 2023 | 0 Comments

What is the Law for Tipped Employees?

When it comes to federal law, tipped employees are classified differently than non-tipped hourly employees. This is because, ideally, these employees are being paid reasonable wages through their tips. Under tipped employee laws, employers are required to pay these workers half of minimum wage if the tips they receive for that week equal that of minimum wage. A tipped employee is classified as someone who regularly makes more than $30 per month in tips.

What Standards are Employers Held to for Tipped Employees?

Under tipped employee laws, the employer can claim a tip credit for these workers but only if the employee meets a certain criteria:

  1. The employee must be paid a minimum hourly wage ($4.35 in Ohio)
  2. The employee must claim at least the amount needed to equal standard minimum wage ($4.35 per hour to equal $8.70 in Ohio)
  3. All employees should be notified of tip credit criteria

These criteria are important when it comes to labor law restrictions and wage theft. When it comes to sharing tips and tipping back-of-house workers, the waters can get a bit murky, and violation of FLSA laws for tip pooling can land employers a costly tip sharing lawsuit.

Tipping Pools

Under the guise of fairness, a lot of restaurants implement “tip pool” policies. These require all tips to go into some sort of “pot” to be distributed evenly among staff after each shift. While it seems like a good idea in theory, tipping pools are not always fair to workers. Sometimes these funds will be distributed among workers not considered tipped employees, like cooks and management. Depending on the nature of the person’s work, sharing tips could be considered wage theft.

Problems with Tip Sharing &Tip Sharing Lawsuits

Tip sharing often includes presenting tips to employees who are not required to work for tipped wage. Tips may not be shared with certain employees and some tip sharing pools may violate state or federal law.

Despite the obvious laws against tip pooling that some workers aren’t eligible to earn tips, some employers still implement these practices under various names, values, and ideals to confuse workers. Employers who violate tipped employee laws could face a tip sharing lawsuit and must pay back thousands of dollars to servers and bartenders.

Many tipped employees have come forward to claim FLSA violations through mandated tip pools. In the eyes of tipped employee laws, for a worker to receive payout from a tip pool they must “regularly and customarily” be paid through tips. This often does not include back-of-house staff that does not often deal directly with customers, and employers who fail to recognize who is and isn’t a tipped employee could face a tip sharing lawsuit.

Tip Sharing Lawsuit Settlement

Employers who are hit with a class action lawsuit for violating FLSA tip sharing policies could face possible tip sharing lawsuit settlements reaching in the millions. If the employer is found guilty, they will be forced to pay tipped employees in the class back wages as well as possible damages. If you are an employer and are worried that your tip sharing policies are violating FLSA laws, it’s best to avoid tip sharing altogether to prevent the possibility of paying a tip sharing lawsuit settlement.

For Tipped Employees

If you are an employee who regularly receives tips and feel that you haven’t been paid fairly because of tip sharing, contact a lawyer about a possible class action tip sharing lawsuit. It’s possible that you aren’t the only one who has suffered these damages and you have a right to the tips you’ve earned.

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