Tennessee workers receiving more than $30 in tips per month are considered tipped employees and have wage rights that are more complex than employees receiving hourly wages or an annual salary.
This includes those who are employed as bartenders, restaurant servers or cleaning staff. There are important federal and state laws exist that protect your rights as an employee.
What is a Tip?
Tips are a form of payment made directly by a customer to an employee for services rendered and must be left voluntarily by the customer, who determines the value of a tip.
Employers cannot predetermine the value of a tip that a customer leaves the employee. If a customer chooses to leave a tip on a credit card, employers may deduct a processing fee from the tip.
An employer can, however, issue service charges, such as a fee for a large party at a restaurant. These are extra fees that are not counted as a tip for the employee and are instead collected by the employer.
Under the Fair Labor Standards Act (FLSA), employers in Tennessee may claim a tip credit.
Tip credits allow employers to pay tipped employees less than federal minimum wage ($7.25 per hour). However, an employee’s tips must make up the difference so that he or she makes at least minimum wage including tips.
Employers must also inform employees of the guidelines below before implementing tip credit:
- Employees must receive a minimum cash wage from an employer of $2.13 per hour.
- Employers must notify employees of the amount that will be claimed as tip credit, which cannot be more than $5.12 – the difference between federal minimum wage and required cash wages.
- Tip credits cannot be an amount more than the total tips claimed by the employee at the end of a shift.
- Unless a valid tip pool exists, only the employee may claim tips earned during a shift.
Tip pools group employees’ tips together to be divided among participating staff members.
Tennessee law allows tip pools in accordance with FLSA standards, which limits participation in a tip pool to only those who regularly earn tips.
Because tips are the sole property of the tipped employee, workers are not required to hand-over an unreasonable number of tips. Employees must still make at least minimum wage even if a tip pool is used.
Problems Tipped Employees Face
Workers who are considered tipped employees often face issues related to earning minimum wage.
- If employees do not earn enough tips to earn federal minimum wage during a shift, employers are required to compensate the employee for the difference.
- If employees are only paid by tips and do not receive any hourly wages, employers must pay full federal minimum wage.
- An employer cannot punish a worker by cutting his or her earnings below minimum wage for non-overtime hours.
- Tipped employees must be compensated minimum wage by employers and reimbursed for incorrectly distributed tips if an employee pays into a tip pool that includes non-tipped staff.
The standards for overtime compensation for tipped employees are different when employers claim a tip credit:
- Overtime has to be paid for the full minimum wage rather than the reduced amount created by the tip credit. Taking larger tip credits for overtime hours versus straight time hours is not permitted.
- Overtime is determined by a regular rate that factors in service charges, bonuses, sales commission and other compensation.
If you are a tipped employee whose wage rights have been violated, the Knoxville employment law attorneys at the Greg Coleman Law firm will fight to secure the compensation you deserve. We are dedicated to ensuring all workers are rightfully compensated and will provide you with a free, no obligation consultation to determine if your claim entitles legal action.