Understanding the FLSA's Tip Credit and Tip Pooling Rules
Many employees in the service sector earn most of their compensation through tips rather than wages. Employers can claim a “tip credit” toward satisfying state and federal minimum wage laws, which means that an employee’s tips are credited toward the employer’s obligation to pay the minimum wage to that employee.
However, the tip credit rules of the Fair Labor Standards Act (FLSA) are full of traps for the unwary. The FLSA also has rules concerning tip pools, which only complicate matters further.
My colleague Mark Beutler and I recently recently published an article on the FLSA's tip credit and tip pooling rules in Thompson Publishing's Employer's Guide to the Fair Labor Standards Act. The folks at Thompson were kind enough to authorize me to post it here.
This is a complicated topic, but Mark and I have done our best to explain the rules as plainly as possible. Please let me know if you have any questions or comments.
