Overtime Laws

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Failure to Provide Tip Credit Information (Tipped Employees)

Generally, all employees are entitled to be paid federal or state minimum wages. However, an employer may pay a tipped employee a “cash” wage less than the federal or state minimum wages by applying a portion of the employee’s tips toward the minimum wage requirement. This is called a “tip credit.” For example, an employer may pay a tipped employee a “cash” wage of $4.50 and apply a “tip credit” to make up the difference between the cash wage and the minimum wage. However, an employer may only apply the “tip credit” if it informs the employee of the provisions set forth in the following paragraph.

If an employer does not inform the employee of the following tip credit provisions, the employee must be paid the entire amount of the federal or state minimum wage while keeping all of his or her tips.

The Tip Credit Provisions:

Before taking a tip credit, an employer is required to provide the following information:

(1) the amount of cash wage the employer is paying a tipped employee;

(2) the additional amount claimed by the employer as a tip credit;

(3) that the tip credit claimed by the employer cannot exceed the amount of tips received by the tipped employee;

(4) that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling agreement limited to employees who customarily and regularly receive tips; and

(5) that the tip credit will not apply to any tipped employee unless they have been informed of the tip credit provisions.

If you are a tipped employee that is being paid less than minimum wage but have not been informed of the tip credit provisions stated above, contact an Overtime Lawyer today.

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