Can my employer take my tips and does my employer have to make sure that I receive enough tips to cover minimum wage?
Under the Fair Labor Standards Act (or FLSA), tipped employees are those who typically receive more than $30 per month in tips. Some examples of tipped employees are servers, bartenders, delivery workers, and doormen.
Tips are property of the employee, not the employer. An employer may, however, use the tips as a credit against its minimum wage obligation. In other words, instead of paying a tipped employee the minimum wage, the FLSA allows an employer to use tips as a “credit” towards its minimum hourly wage requirement equal to the difference between the required cash wage (or “tipped wage”) and the federal minimum wage. The current federal cash wage is $2.13 per hour, while the current federal minimum wage is $7.25 per hour. As such, the employer may consider up to $5.12 of the employee’s tips towards its minimum wage obligations.
Importantly, states may have varying cash wage and minimum wage requirements in excess of the requirements under federal law. In New Jersey, as of January 1, 2017, the minimum wage is $8.44 per hour. Despite New Jersey’s increased minimum wage, its minimum cash wage is the same that is required under the FLSA (i.e., $2.13 per hour). As such, employers may take a maximum tip credit of $6.31 per hour against the minimum wage.
An employer may not claim a tip credit that exceeds the amount of tips actually received by the tipped employee. For example, Jane Doe works the overnight shift at a diner in New Jersey where she is typically paid the cash wage of $2.13 an hour by her employer. On a particularly slow night, she only works for one hour at 3 a.m. before being sent home. In that hour she only receives $1 in tips by a single customer on his omelet order. As a result, she only made $3.13 in that hour. The diner cannot claim the maximum $6.31 as a tip credit. The diner can only claim $1 towards its minimum wage obligations and should make up the difference between the $3.13 Jane received that hour and the state minimum wage of $8.44. Therefore, the diner owes her $5.31.
If you are a tipped employee and believe that your employer is not properly compensating you or have questions about your compensation, contact an experienced employment law attorney at Cohn Lifland.