Tipped Employees Under FLSA and Ohio Law

Ohio and Fair Labor Standards Act (“FLSA”) Attorneys:  Tipped Employees

As Columbus, Ohio, and Toledo, Ohio, unpaid overtime and minimum fair wage attorneys, it is important to inform tipped employees of their rights under federal and Ohio law. Often times employers in the restaurant, hospitality and service industries try to increase profits at the expense of their employees who depend on tips as a large part of their compensation. In these industries, employers sometimes fail to ensure they meet minimum wage rate requirements, handle the “tip credit” properly, and fail to help tipped workers understand their pay. Failure to adhere to the FLSA and Ohio requirements results in unpaid overtime and minimum fair wage violations.

This post is to provide a brief overview of issues facing tipped employees, mainly the requirement of a tip credit notice as well as the requirement to still pay tipped employees overtime when they work over 40 hours in a work week. If you believe you are owed unpaid overtime or minimum wages as a result of your employer’s conduct, contact a Columbus or Toledo Ohio and FLSA attorney at Bryant Legal, LLC to discuss in more detail.

Tipped Employees Overview

The federal Fair Labor Standards Act of 1938 (FLSA) requires employers to pay employees at least the federal minimum wage rate, currently $7.25 per hour. One exception is the “tip credit.” Both the FLSA and the Ohio Act permit employers to pay “tipped employees” less than the statutory minimum wage if the tips the employee receives, when combined with the hourly wages paid by the employer, equals or exceeds the minimum wage. See 29 U.S.C. § 203(t). “Tipped employee” is “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Tipped employees largely work in the restaurant, hospitality and service industries and they regularly receive tips in the performance of their jobs. Examples include, but are not limited to waiters/waitresses, bartenders, strippers in strip clubs, and wait staff, among others.

Both statutes set a base wage that employers must pay to tipped employees. Under the FLSA, the base wage for tipped employees is $2.13 per hour. Under Ohio law, the base wage for tipped employees is one-half of the statutory minimum wage. This is known as the “tip credit” as described above. See 29 C.F.R. § 531.59. If the base wage and the employee’s tips do not equal the statutory minimum wage, the employer is required to make up the difference.

To that end, there are several conditions to the tip credit. For an employer to claim a tip credit, its tipped employees:  1) must regularly receive at least $30 a month in tips, 2) must paid an hourly wage of at least $2.13 per hour, 3) must retain all tips, and 4) must be given actual notice, in advance, of the employer’s use of the tip credit provisions of the FLSA. (29 C.F.R. § 531.59).

The notice must include:

• the amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;
• the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25);
• that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
• that all tips received by the tipped employee are to be retained by the employee, except for a valid tip pooling arrangement; and
• that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Employers must inform their employees that it intends to treat tips as satisfying part of employer’s minimum wage obligation; at minimum, employer must provide notice to employees of its intent to take tip credit, and if employer fails to do so, tip credit may not be claimed regardless of whether employees suffered actual economic harm as result. See 29 U.S.C. § 203(m), 206.

An employer cannot rely on what employees might infer from pay stubs showing sub-minimum wages or its tip reporting practices to confer the notice. See Solis v. Min Fang Yang, 345 Fed.Appx. 35, 38 (6th Cir. 2009) (despite informing its employees that their pay would consist almost exclusively of tips, it did not discuss its minimum-wage obligations or explain that it was applying a tip credit against that obligation. Thus, the employer failed to meet its statutory notice requirement for receiving tip credit.)

In addition to not fulfilling the tip credit notice requirements above, employers can lose the ability to apply the tip credit for a variety of reasons, including managers and owners taking part of the tips or forcing the employees to share tips with traditionally non-tipped employees.

Tipped Employees Must Also Be Paid Overtime

If you are a tipped employee and work over 40 hours per week, you are entitled to overtime pay at a rate of at least one-and-a-half times their standard hourly rate. Thus, tipped workers getting $2.13 per hour for regular time should be paid one and half times the minimum wage of $7.25 (which comes out to $10.88) for each hour worked over 40 hours in the given work week.

In the event you are a tipped employee and have reason to believe your wages are incorrect, you have not been paid overtime, your tips are not properly being accounted for, and/or you were not properly informed of a tip credit notice, contact an Ohio and FLSA attorney at Bryant Legal, LLC to discuss in more detail.