Tipped Employees

Written by Jen Borland, Private Monitoring

The US Dept of Labor states:

“An employer of a tipped employee is only required to pay $2.13 per hour in direct wages if that amount combined with the tips received at least equals the federal minimum wage. If the employee’s tips combined with the employer’s direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage, the employer must make up the difference.” (http://www.dol.gov/dol/topic/wages/wagestips.htm)

When an employer reports paying less than $7.25 per hour (hourly wage and tips combined) on an Employment Verification (EV), follow up must be done with both the employer and the applicant.

It must be clarified why an employer is reporting paying less than federal law requires. In most cases we find that the EV does not contain accurate information. It is important to have the employer disclose year-to-date earnings (both hourly wages and tips) to help determine actual income. A documented telephone conversation with the employer is an acceptable method of clarification, though a series of pay stubs is preferred.

Obtaining several consecutive pay stubs is helpful in determining if the employee is really working as many hours as an EV might report. Pay stubs will also show tips earned; be sure to compare the tips on the stubs with what is reported on the EV. If the individual has had the same job for more than one year, previous years’ tax returns can also be useful.

Additionally, it is the employee’s responsibility to report tips to his/her employer, though this may not always happen. In some salons or restaurants the employees handle their own money from sales, in others all transactions are conducted a reception desk. Since it is possible that tip income is received that the employer does not know about, Spectrum recommends that the applicant complete a self affidavit under penalty of perjury stating all tip income, including tips not reported to the employer. Asking an employer about the establishment’s procedure for disbursing tips is a good idea as well.

Common tipped positions:

  • Server/Waiter/Waitress
  • Host/Hostess
  • Bartender
  • Busser (busboy)
  • Hairdresser
  • Adult Entertainer

It is important to look at such files carefully. A tipped employee earning minimum wage who works 40 hours a week must make at least $205 a week in tips to meet the minimum wage requirement. That’s only $41 per day in tips (assumed an 8 hour day). As always, remember to ask yourself if the information reported makes sense.

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