Tennessee employees who receive tips as part of their compensation

The Fair Labor Standards Act (FLSA) was established to protect all employees. The minimum wage provisions of the FLSA apply to employees that receive tips as a part of their income as well as those who do not. Employees who receive tips as part of their income, like waiters and waitresses, bartenders, bell boys, and delivery people, are sometimes victims of employer practices that actually reduce the employees income below the minimum wage. When this happens, an employee does have a remedy under the law.

On top of the increasingly common problem where employees simply do not make enough in tips plus their lessened hourly rate to equal minimum wage, there are three other common areas where employers have encroached on the wages of tipped employees: tip pooling, tip retention and uniform costs.

Tip pooling is where the employer requires the employee to participate by pooling their tips in a group for a distribution across a pool of employees. Tipped employees cannot be required to participate in a program that must tip out to employees that are not common tip recipients, such as dishwashers or cooks. The rationale is that those employees are already above the minimum wage threshold and the tips are property of the person who receives the tip, not the employer.

Tip retention is an agreement wherein the employer retains any portion of the tips. Tips are immediately the property of the employee who receives them. As stated earlier, there can be pooling agreements, but the employer is not allowed as a participant of the pool.

Lastly, some employers will require, particularly during initial employment and training, their employees to purchase or rent uniforms. If the cost of the uniform, when balanced against the reduced wage plus tips, causes the actual hourly income to fall below minimum wage, the employer must make up the difference. Similarly, some positions require a training period where tips are not earned or are earned at a significantly reduced rate. If the employee does not earn the minimum wage, the employer must make up the difference.

If you feel that you have been a victim of any of these practices, the Higgins Firm represents employees in an effort to make things right. Contact our Tennessee Employment Law Office if you have questions.