Legal for Your Boss to Take Your Tips?

Is it ever legal for your boss to take your tips? This question hits home for millions in the restaurant industry, along with other service workers; for many, gratuities can make the difference between a living wage and living in poverty.

Generally, the answer is a resounding "no": It is not legal for managers to take a worker's tips. Tips belong to the employee.

But before you raise the issue with your boss, there may be some legal caveats to consider.

Tips and the FLSA

The Fair Labor Standards Act (FLSA) governs wage-related rules for tipped employees. This includes restaurant servers, bartenders, and valets -- anyone who receives gratuities from satisfied customers.

Under the FLSA, tips are considered the sole property of the tipped employee.

A "tipped employee" is someone who gets more than $30 per month in tips. The employer can only use an employee's tips as a credit to offset the employer's minimum wage obligation to the employee (called a "tip credit"), or for a valid tip pool.

'Tip Credits' Explained

A tip credit is equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. Thus, the maximum tip credit that an employer can currently claim under the FLSA is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13).

Still, a tip is the sole property of the tipped employee. It doesn't matter whether or not the employer takes a tip credit.

The FLSA doesn't allow any arrangement between the employer and the tipped employee where the employer is able to retain a tip.

For example, even where a tipped employee receives at least $7.25 per hour in wages directly from the employer, the employee can't be required to fork over his or her tips to the employer.

Tip Pools

Tip pooling among employees is a pretty common practice in the food industry. Even so, employers have pretty strict limits when it comes to tip pools. The employer:

• Has to give notice to tipped employees of any required tip pool contribution amount,
• Can only take tip credits, and
• Can't retain any employee tips for any other purpose.

Also, a tip pool isn't supposed to include employees who don't usually get tips, like dishwashers, cooks, chefs, and janitors.

Is Your 'Tip' Really a 'Service Charge'?

Finally, is your "tip" really a "tip"? For example, if your restaurant automatically adds a "service charge" for large parties, then that mandatory charge may be considered part of the customer's bill, and not a gratuity. A recent IRS ruling clarified the tip v. service charge distinction, as the Journal of Accountancy reported.

While it's generally not legal for your boss to confiscate your tips, each case of alleged tip theft is different. You may also want to consult an experienced employment lawyer to hash out the law and figure out how to keep the dough that's legally yours.

Related Resources:

• Find Employment Lawyers Near You (FindLaw's Lawyer Directory)
• FLSA Reference Guide (FindLaw)
• Starbucks Tip-Pooling is Illegal in Massachusetts (FindLaw's First Circuit Blog)
• Chef Mario Batali Sued in Wage Dispute (FindLaw's Law and Daily Life)
• Can You Refuse to Pay a Mandatory Tip? (FindLaw's Law and Daily Life)