Understanding Tip Violations

Federal Laws

The Fair Labor Standards Act (FLSA) sets rules for tipped employees:

• Employers may take a “tip credit” toward the minimum wage, but only if specific conditions are met.
• Employers cannot keep any portion of employees’ tips.
• Tips may only be shared through a valid tip pool among employees who customarily receive tips.

State Laws

 Many states offer stronger protections, such as:

• Higher minimum cash wages for tipped workers
• Prohibiting the tip credit entirely
• Stricter rules for tip pooling
• Additional penalties for violations

• Keeping a portion of employees’ tips for the business or management
• Paying less than the required cash wage for tipped workers
• Forcing tipped employees to share tips with non-tipped workers in violation of the law
• Taking a tip credit without meeting legal requirements, such as failing to inform employees in advance
• Deducting credit card processing fees from tips when prohibited by law

 Evidence may include:

• Pay stubs showing improper tip deductions or underpayment
• Witness statements from other employees
• Employer tip pool policies that violate federal or state laws
• Records showing improper use of the tip credit

Federal and state laws prohibit employers from retaliating against employees who:

• Report tip theft or other tip-related violations
• Refuse to participate in an illegal tip pool
• File a wage and hour complaint
• Testify in a labor investigation

Retaliation can include termination, schedule changes, reduced hours, or other adverse actions.

Potential remedies may include:

• Repayment of stolen or improperly withheld tips
• Back pay for unpaid minimum wage or overtime
• Liquidated damages equal to the amount of lost wages and tips
• Attorneys’ fees and litigation costs
• Civil penalties against the employer under state law

Employers can reduce risk by:

• Clearly explaining tip pooling arrangements and ensuring compliance with the law
• Paying the proper cash wage for tipped employees
• Keeping accurate records of tips and wages
• Avoiding any practice that diverts tips away from employees

Miller Shah LLP is prepared to evaluate and pursue tip violation matters on behalf of employees whose tips have been unlawfully withheld or misappropriated. The firm’s attorneys assess claims under federal and state wage and hour laws and advocate for remedies to protect the rights of tipped workers.