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February 27, 2010
Wage Issues for Tipped Employees

In a BLR webinar entitled "Wage & Hour Risks in 2010: Preventing the Most Common (and Costly) Wage & Hour Mistakes," attorneys Mark E. Tabakman and Thomas C. Wigand discussed how the federal Fair Labor Standards Act (FLSA) and state laws handle compensation for tipped employees. The attorneys stressed caution to employers who practice “pooling” tips in light of recent court decisions.

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Under current federal law servers may be paid as little as $2.13 per hour, as long as their estimated tips bring their earnings up to the current federal minimum wage. In many states, if employees who receive tips average at least $30 a month in gratuities, the employer may take a "tip credit" and pay a much lower hourly rate, with those workers making up the difference in tips.

It is important to note that many states require higher hourly wages for tipped employees - and some like California don't allow the tip credit for employers at all.

Employers should exercise caution if you "pool" tips - collecting the gratuities paid to servers and splitting the money as well with busboys, bartenders, and other employees. Several recent court cases have found that tips cannot be shared with employees who don't actually serve customers (including not only dishwashers and chefs, but also managers).

Mark E. Tabakman, Esq., is a partner in the nationwide law firm Fox Rothschild, LLP. He can be contacted by e-mail at

Thomas C. Wigand, SPHR, Esq., is the founder of Wigand Associates LLP, an employment advisory consulting practice based in Middletown, Rhode Island. He can be contracted by visiting

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