The Fair Labor Standards Act provides strong protections to ensure that tipped employees never earn less than the applicable minimum wage. Restaurants face significant penalties and legal repercussions if they do not ensure that their employees are earning the applicable minimum wage. Employers must meet the following conditions in order to claim any tip credit:
- A tip credit can be taken only against the wages of employees who customarily and regularly receive at least $30 per month in tips.
- In cases where an employee’s tip earnings fall below the maximum permissible tip credit, the employer is responsible for providing the cash wage necessary to bring the employee up to the minimum wage.
- The employer must notify the employee of the tip credit taken.
- Employees must be allowed to retain all of their tips, except where tip pools are allowed.
- Employers must have records documenting that employees earned tips in an amount at least equal to the tip credit claimed.