What tipped employees should know about upcoming changes to the FLSA

| Feb 12, 2021 | Employment Law |

The Fair Labor Standards Act (FLSA) includes provisions that protect tipped employees from a number of potential violations by employers. A new rule announced by the U.S. Department of Labor (DOL) at the end of 2020 amends the FLSA.

The new rule codifies DOL guidance that’s already in place. Although it’s scheduled to take effect on March 1, the DOL says it may be delayed until the end of April to give the new administration time to review it.

Tip credits and tip pools

A key portion of the amendment to the FLSA prohibits employers, including managers and supervisors, from keeping tips received by their employees, regardless of whether the employer takes a tip credit. However, employers are typically allowed to take a tip credit against the minimum wage.

For example, here in Massachusetts, the minimum cash wage is $5.55. The combined cash and tip minimum wage is $13.50. That applies to people who earn at least $20 per month in tips. If an employer chooses, they can take a tip credit of $7.95 (the difference between the two types of wages).

The amended FLSA also prohibits employers from allowing employees who don’t typically receive tips (like those who work in restaurant kitchens) from being included in tip pools. Further, employers who mandate tip pools must distribute tips at least as often as employees receive paychecks.

State minimum wage laws for tipped employees vary widely

It’s important for people who work in restaurants and other tipped jobs to understand that wage laws vary significantly by state. For example, some states don’t even have a state minimum wage. Employers only have to pay tipped employees the federal minimum cash wage of $2.13. Other states require employers to pay tipped employees the full state minimum wage regardless of how much they take home in tips.

Many tipped employees, especially those who are young and in their first jobs, know little about the laws that mandate how much income their employer must let them keep. Even people who have been in these jobs for years may assume that their employer knows the law and is following it.

Sadly, that’s not always the case. If you believe your employer is violating the law and you haven’t been able to reach a resolution with them, it’s wise to find out just what the law says and what options you have.