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By virtue of Florida’s tourism industry, hospitality employees make up one of the most significant portions of the state’s workforce. Where you see hotels, restaurants, bars, night clubs and casinos, you will find hourly-paid employees who rely heavily on tips for wages and compensation.  In fact, tips may comprise the majority of their income.

Federal and state law actually allows employers, if certain conditions are met, to pay tipped employees (for example: waitstaff, bartenders, valet parking attendants, card dealers) less than the applicable minimum wage if the total wages paid plus tips received by the employee equal at least the minimum wage. The difference between the reduced wage and the minimum wage is known as the “tip credit.”  The ability of an employer to take the tip credit is prescribed by Section 3(m)(2) of the federal Fair Labor Standards Act (FLSA).

Wages in Florida

Florida employers may pay tipped employees a cash hourly wage as low as $5.63 per hour.  However, if the weekly tips received by a given employee and the cash wages do not equal at least the Florida minimum wage, which is currently $8.65 per hour, the employer must pay the difference.

Employers can require tipped employees to participate in a tip pool whereby other customarily tipped employees may receive a share of the pooled tips.  For example, restaurants often implement tip pools to which waitstaff must contribute a portion of their tips.  Employers then split shared tips among certain support staff such as hosts, bussers, bar backs and food runners.

Historically, neither federal nor Florida law restricted an employer’s handling of employee tips if the employer did not take the tip credit.  As long as the employer paid the full minimum wage without taking a tip credit, it could require pooling and distribution of tips as it saw fit.  This included allowing the participation of not only non-tipped employees, but also managers, supervisors and even owners. That changed in 2018 with an FLSA amendment pursuant to the Consolidated Appropriations Act, 2018 (CAA).  Per this legislation, employers who do not take the tip credit may still allow non-tipped employees to participate in a tip pool; however, the law prohibits the distribution of pooled tips to managers and owners regardless of whether the employer takes the tip credit.

It is important to note that under the federal FLSA, an employer may only utilize the tip credit if the tipped “employee has been informed of the provisions of [Section 3(m)(2) of the FLSA]…”  An Employer cannot simply assume that the employee understands that they will be paid a tip credited wage.  The employee must expressly communicate their understanding.

Takeaways for Employers

  1. Be sure you clearly communicate with tipped employees at the outset of their employment as to how they are going to be paid. This is critical if you are going to lawfully take the tip credit. Ideally, this communication should be in a writing signed by each employee and should expressly reference and track the language of Section 3(m)(2) of the FLSA.
  2. To the extent you maintain a tip pool, be sure that only authorized personnel receive tips from the pool. Do not allow “back of the house” staff (g., cooks and dishwashers), managers or owners to partake.
  3. Closely monitor payroll to be sure that tipped employees are receiving at least the Florida minimum wage after adding tips and the tip credit wages and make up any difference if there is a shortfall.

For Tipped Employees

  1. Know your rights under the FLSA and the Florida Minimum Wage Act.
  2. If your employer takes the tip credit ,and you do not receive at least the Florida Minimum Wage for a given workweek after adding your tips to the tip credit wage, your employer must make up the difference.
  3. Your employer cannot lawfully require you to contribute to a tip pool from which non-tipped employees receive a share.
  4. State and federal law prohibit employers from taking an adverse employment action against employees who make good faith complaints of minimum wage violations.
Photo by Karolina Grabowska from Pexels