The Fair Labor Standards Act is the federal law that says whether your employer can take your tips. The state labor department oversees state rules surrounding this issue. Regardless of whether your employer can take your tips, it must pay you at least the federal or state minimum hourly wage, whichever is more.
General Federal Rule
Under the FLSA, tips belong solely to tipped employees, which include servers. Under no circumstances can your employer or boss claim your tips. The act also forbids any arrangements that say your tips belong to your employer. Under the FLSA, as of 2013, your employer must pay you direct hourly wages of $2.13, if that amount plus your tips equal at least the federal minimum wage of $7.25 per hour. If not, your employer must pay you the difference. Your employer may use your tips as a credit to help bring your wages up to at least the minimum wage. If your employer doesn't use the tip credit and chooses to pay you direct hourly wages of $7.25, it can't take your tips.
Under the FLSA, and provided there’s a valid tip pooling arrangement, servers and other tipped employees can be required to pool their tips and share them with each other. Your employer can't participate in the tip pool, nor can it take any of the tips in the pool. The portion of your tips that goes toward bringing your pay up to the minimum wage can't go into the pool.
You should review your state labor department’s guidelines on employers taking employees’ tips, as it might differ from federal law. For example, in Colorado, an employer can claim the right to, ownership of or control over an employee’s tips if it posts a printed card of a specific size in a noticeable area of the business. The poster must say that all gratuities or tips given by patrons belong to the employer instead of the employee. If the customer pays the bill and your tip with a credit card, state law may allow your employer to deduct a portion of your tip to cover the credit card processing fee.
Many states allow employers to use a tip credit as defined by state law, but there are exceptions. For example, in California, an employer can't use a tip credit to bring an employee’s wages up to the minimum wage. In this case, tipped workers must receive at least the 2013 state minimum wage of $8 per hour plus their tips.
Federal law and many states don't consider mandatory service charges that are added to customers’ bills as tips. This rule stands even if the customer thinks the extra money will go to you and doesn’t leave you a tip as a result. Your employer can give you a portion of the service charge if it wants to, but it doesn’t have to. The state might have an exception. For example, in New York, an employer must make it clear to customers that it will keep all the money. Otherwise, all of the mandatory service charges must go to the employee.
- U.S. Department of Labor: Fact Sheet #15: Tipped Employees U nder the Fair Labor Standards Act (FLSA)
- Nolo: Tips, Tip Pooling, and Tip Credits: What Service Employees Need to Know
- Colorado Department of Labor and Employment: Tipped Employees
- California Department of Industrial Relations: Tips and Gratuities
- U.S. Department of Labor: Minimum Wage Laws in the States - January 1, 2013
- Jupiterimages/Photos.com/Getty Images