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Managing Tipped Employees Under Federal and Florida Law

Tip

As an employer, you are well-aware of the minimum wage laws for employees under federal and Florida law. However, paying tipped employees can be very different compared to paying workers a salary or a straight hourly wage.  The laws allow employers to use part of an employee’s tips only under certain circumstances and only after the employer complies with the requirements of law.  There are severe  consequences for non-compliance with these requirements, which include paying  pay back wages, liquidated damages, interest, and costs and attorney’s fees. If you currently employ tipped workers or have plans to hire them, check your policies to ensure compliance under the applicable regulations and avoid a potentially expensive wage dispute.

General Minimum Wage Laws

Under the federal Fair Labor Standards Act (FLSA) employers must pay a minimum wage of $7.25 an hour to all employees. However, if a state has enacted a law regarding minimum wage that exceeds the federal amount, the employee is entitled to be paid the higher amount. In Florida, the current minimum wage is $8.10 hourly for most employees.

Tipped Employees Under Federal and Florida Law

Workers may earn money through tips by providing services to customers, such as waiting tables, mixing drinks, carrying luggage, parking cars, cleaning hotel rooms, or acting as concierge. When employees receive tips as a portion of compensation, and the employer wishes to use part of those tips to pay its employee, then certain eligibility rules apply. Under the FLSA, a “tipped” worker is one that customarily earns more than $30 per month in tips.

Florida law uses this same federal definition, but applies its own regulations regarding the amount. An employer may pay tipped employees less than minimum wage, so long as employees earn enough in tips to raise their total earnings to $8.10 per hour. The arrangement is known as a tip “credit.” In Florida, an employer may use up to $3.02 per hour of the tipped employee’s tips to pay him or her the full Florida minimum wage.  Currenly, the Florida minimum wage is $8.05 per hour, therefore,  $5.08 per hour is the minimum direct wage that an employer can pay to a tipped employee. If the employee doesn’t actually earn enough tips to equal the minimum hourly wage of $8.10, the employer must pay the difference.

Before using this “tip credit” method of paying tipped employees, an employer must provide specific information to the tipped employees. Failure to do so may invalidate the method of payment.  The requirements are the following:

1) the amount of cash wage the employer is paying a tipped employee per hour;

2) the additional amount claimed by the employer as a tip credit, which cannot exceed $3.02 per hour in Florida;

3) that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;

4) that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and

5) that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Tip Pooling

An employer may implement a plan where employees pool their tips, and divide those tips between the tipped employees. A “tip pool” arrangement is common in the hospitality industry among servers, bartenders, and bussers. The key to maintaining a valid tip pool arrangement is ensuring that only employees who customarily receive tips share in the pool. Tipped employees cannot be required to share their tips with employees that don’t customarily earn tips, such as a cook or a manager.

Employers know the importance of compliance with all state and federal wage laws, but may not be familiar with how tipped employees are treated under specific regulations. Florida law does provide you with options, so it’s important to consult a lawyer to understand how to use the tip credit and tip pools correctly.  An experienced employment attorney can offer advice and ensure you’re taking advantage of the benefits, as well as assist you with implementing a policy at your workplace. For more information about tipped workers, please contact the Miami office of Penichet Law. We’re happy to answer your questions or assist with wage disputes.

Resource:

floridajobs.org/docs/default-source/2017-minimum-wage/florida-minimum-wage-2017-announcement.pdf?sfvrsn=2