Wise up on your Wage

According to the Restaurant Opportunities Center of NY, “Whether or not you have legal documents to work in this country, you are protected by most Federal and state Labor laws.” Employers who threaten to report employees to I.C.E. are in violation of  Federal law and may be prosecuted.

 

Tip Credit Wage Deductions Your Tips:The Basics Tip Pooling Reporting Tips

Your  Server Wage: The Basics

1.   The most common and accepted way to pay servers in the U.S. is based on the tip system. Servers earn most of their income from tips received and diners are expected to pay an additional amount of 15- 20 percent for service  based on the amount of a meal by leaving a tip.  Although the diner is free to leave any amount or nothing at all, it is a common practice and culturally enforced.   Most employers are allowed to pay servers a direct special sub minimum wage that is lower than the federal minimum wage.

In other countries and in Europe it is more common for servers to receive an hourly living wage and often they do not expect or receive tips. The federal subminimum cash wage for  food servers in the U.S. is $2.13 per hour. States with lower sub minimum wages than the federal ($2.13) include  Oklahoma ($2.00), Virginia, and New Jersey ( These states are allowed to take a higher tip credit if they meet certain conditions resulting in a lower cash wage or none at all).

2.   On July 24,2009  the Federal minimum wage increased to $7.25

The federal subminimum wage for tipped workers including servers DID NOT increase. It is still $2.13.  In fact, the sub minimum wage has not been raised in 20 years. Only the tip credit  increased; meaning employers will be able to count an increased amount of tips towards a servers wage.  $2.13 + tips = $7.25

3. Why hasn’t the Federal subminimum wage for waiter and waitresses been raised in 20 years?

In 1996, Republican lawmakers sided with restaurant industry  lobbyist and froze the subminimum wage at $2.13.  If the subminimum wage returned to 50 percent, then waiters and waitresses would earn $3.63 per hour today.

The National Restaurant Association is powerful and has the means to employ powerful  lobbyists to persuade your legislators to  not support an increase in the sub minimum wage as that would cut into thier profits. Last year the NRA reported that the restaurant industry generated more than 650 billion in sales. 

4. What can you do about it? 

 You can tell your congressman to support the W.A.G.E.S act HR631,(Working for Adequate Gains for employement in services Act) If the bill passed, it would raise the federal minimum wage for tipped workers from $2.13 to $3.75 after 90 days of enactment and $5.00 after one year.

5. Why should you care? Why is $2.13 Mean?

It increases the poverty level in states where it is binding. 19.4% of waitresses and waiters who earn a base wage of $2.13 are living below the poverty rate.

It depletes welfare programs due to more people living in poverty.

It can have a negative impact on Tourism revenues.  It encourages a high turn over rate, poor quality service and less investment in the front of the house staff who have first contact with tourists.  When front of the house service is valued and recognized for its potential impact on attracting and keeping tourists for repeat visits, state revenue is increased.

Most tipped workers  who earn this base wage of $2.13 also have to pay for thier own health insurance and the majority have no benefits.  Enhanced benefits such as paid sick time might encourage a waiter or waitress to stay home when they are sick, instead of handling plates of food and jeopardizing Public safety.


The Tip Credit (70% today)

A TIP CREDIT is the total amount of tips an employer may count towards the total applicable minimum wage. The federal tip credit is $5.12. per hr.   A employer is allowed to pay servers $2.13 because they are claiming servers will make at least $5.12 an hour in tips. THIS IS WHY THEY ARE NOT REQUIRED TO PAY YOU THE FULL MINIMUM WAGE . $2.13 + tips received(Tip credit) must= the full  applicable minimum wage.

*Other states and cities have higher or lower tip credits. In Santa Fe, NM, for Example, where the full minimum wage is$10.25 employers take a higher tip credit.  Tipped employees in Santa Fe still only earn a base wage of $2.13. but those servers are supposed to make enough in tips to meet the city minimum wage. If  they don’t, under city ordinance,  the employer is supposed to  reimburse them.     Some states such as Virginia and New Jersey, allow employers under certain circumstances to take a full 100% tip credit. This means servers in these states may receive no hourly cash wage at all. States that prohibit the tip credit include: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. Servers who work in these states (equal states) receive the same minimum wage as all other workers.

  • AN EMPLOYER IS NOT ALLOWED TO TAKE THE TIP CREDIT UNDER THE FOLLOWING CONDITIONS:

WHEN THERE ARE NO OPPORTUNTIES TO EARN TIPS.

Required attendance for staff meetings, training period or any time you must work but are not receiving tips. For example, if your employer requires you to come in on your day off for a staff meeting or to help set up Christmas decorations, they are required to pay you the full applicable minimum wage. Side work can only account for 20% of your shift. Excessive amount of time performing side work forfeits the employers right to the tip credit.

WHEN TIME PERFORMING SIDEWORK TAKES UP MORE THAN 20 % OF THE SHIFT.

Your main role must be waiting tables. If your employer requires to spend excessive amounts of time performing various duties such as cleaning, office work, ect, they are in violation of taking the tip credit.

Tip Credit History

1966 The Tip Credit is created.  In 1966, the Tip credit was 50%.   In 1980, the tip credit is reduced to its lowest  rate at 40 percent.  In 1996, the tip credit is frozen at 50% of the regular minimum wage, which was $4.25.  Today, Allegretto & Fillion (2009) report that the subminimum wage is ate the lowest share of the regular Federal minimum wage on record at just 29.4%.  In Santa Fe, New Mexico who has the highest minimum wage in the U.S (10.25) waiters and waitresses still only earn a base wage of $2.13, the tip credit is even higher aprox 80% .  If the tip credit returned  to 50 percent, then the federal subminimum wage for waitresses and waiters would be $3.63 today instead of $2.13 per hr.

When the U.S Dept of Labor states “If an employee’s tips combined with the employers direct wages do not equal the minimum hourly wage, the employer must make up the difference”, it only applies to the work week, not just the day you failed to make minimum wage.

(Federal min wage )$7.25 x 7 = $50.75. (daily)     or   $7.25 x 30 hrs = $217.50 (weekly)     In Santa Fe,  for example if you worked 30 hours, you must have earned at least $307.50 for the week combining tips and wage.  $2.13 +$7.73 (tip credit) = $10.25. If not, the employer must reimburse you. (The Santa Fe City living wage law is rarely enforced by City Officials for tipped workers)

Overtime on subminimum wages is determined by multiplying the employee’s regular rate of pay by 1.5 and then by subtracting the hourly tip credit.  The employee’s regular rate of pay can never be less than the full applicable minimum wage rate. Example $7.25(Fed min wage rate or applicable min wage rate)  x  1.5   minus  $5.12 (Tip Credit)  = overtime hourly rate for servers who receive sub minimum wages.

Vacation pay is considered a “Benefit” and not covered or enforced by Federal/state wage and hour laws. You can file a discrimination case, however, if your employer elects to only provide vacation pay to employees of a certain ethnic background or gender who perform the same job.

WAGE DEDUCTIONS:

The following ways a employer can legally deduct or reduce a servers cash wage or tips include:

  • requiring servers to contribute to a tip pool
  • deducting a percentage from a server’s credit card tips to cover the cost of credit card processing fee.*Some states prohibit this
  • Tip Credit
  • Taxes-such as FICA, State
  • Any other deductions must be approved by you first

 

WAGE THEFT

The three most common ways a employer may illegally deduct or reduce a servers wage include:

  • Requiring tipped employees  who receive a sub minimum wage to participate in a invalid or illegal tip pool. For example, a tipped employee is forced to share tips with non-tipped workers such as dishwasher, cooks, and janitors. These workers usually are not required to report these tips but you may still end up paying income taxes.  For more info search: FLSA fact sheet #15 for tipped employees. The Department of Labor just released a revised version of the Fair Labor Standards Act Fact sheet#15 for tipped employees March, 2011.
  • Requiring server’s to pay the bill for customers who walk out,mistakes on bills, food sent back and breakages that bring the servers wage below min wage.  for example, if a walkout occured and the bill was $200, the owner could not make the server pay the entire amount.  Under the revised FLSA fact sheet #15, the employer may in some cases only withhold an amount that does not bring the servers wage below the federal minimum wage of $7.25.
  • Requiring tipped employees to surrender wages/tips/earnings  to the owner or a manager. Some restaurants may require contribution into a “error account”, meaning that you pay ahead of time for any mistakes you may incur  and they keep these tips locked away in the office or safe.  Tips are not allowed to become the property of the owner, manager. They must be shared with a tip pool not stored in a safe for future use.
  • All of these deductions can be challenged and recovered through the Department of Labor or an attorney.  In some states that have treble laws, a server may collect three times the amount in lost wages  if the employer challenges the claim in magistrate court.

FILING A WAGE CLAIM:

*You have up to two years in most states to file a claim under the  statute of limitations.  Some states like New Mexico allow three years to file a claim. – This means ,if you do not want to  risk losing your job by making a wage claim,  you can wait until you have moved on to another job to make your claim.   But you should keep good records, testimonies from other workers, a log of dates and times and any correspondence of email with your employer  for when you are ready to file a claim.

You can also hire an attorney who in some cases, may be able to go back six years, while the state in most cases will only award wage claims that go back two years.

File with the Federal Wage and Hour if your state does not have a minimum wage law.

File with the State Wage and hour if the state has equal or more powerful protections than Federal Wage and Hour.

If you live in New Mexico, the only state in the nation that has a binding state law of $2.13, File with Federal Wage and Hour. Although New Mexico matches the Federal subminimum wage, it does not match the protections offered under Federal law and does not prohibit employers from requiring tipped employees from sharing tips with back of the house employees. New Mexico does not enforce FLSA Standards.

FILING FOR UNEMPLOYEMENT

If you file a wage claim and quit your job before you find another job, you may be able to claim unemployment insurance.

To qualify for unemployment insurance you need to prove:  You quit for “Good Cause”.

  • You must prove that you tried to reconcile the situation with your boss. For example, if the employer is requiring you to contribute to an illegal tip pool as a condition for employment, You need to prove that you raised your concern over the illegal practice and your boss still refused to change the practice. Correspond through email if possible- This establishes correspondence.

Although you may receive a letter of determination that your claim does not constitute good cause, do not give up. Appeal. Many state officials do not thoroughly understand the FLSA and will make a quick judgment. Its up to you to hang in there and make sure they do.  Every states is different. You should contact them to find out what they consider valid reasons for quitting.  And even if you do find another job while waiting on the appeal, you may still  be able to collect on the weeks you certified if you win.

 

Your Tips: the Basics

1.   Service charge vs. tip.

  • When a service charge is added to a customers bill,  full payment is expected and required from the customer.    Tips are strictly voluntary and nonenforceable.   Patrons can choose to leave a tip or not, for any amount they choose.
  • Any currency/monies recovered or received from a service charge are property of the employer/restaurant and  and any monies a server receives from a service charge is recognized as a “commission” rather than a tip and is reported as income.
  • Any tip provided by the customer and intended for the server is considered the property of the server and any monies a server receives from a customer is defined as a tip or a gratuity.

So basically, an automatic service charge belongs to your employer and they can choose how much they want to share with the server. They may even choose not to share anything. (if  this is the case, they must pay the full applicable minimum wage, not a subminimum wage)

A tip however, even if wait staff is required to participate in a tip pool is still considered the property of the server.  Some in the industry believe an automatic service charge would  help eliminate financial  risk  for servers. This however, would only be true if servers are guaranteed a certain percentage or commission, otherwise employers might not disburse any of the service charge to wait staff.

2.  Credit Card Tips

  • Employers are allowed to charge servers a fee to receive credit card tips by deducting a  processing fee. The industry standard is three percent, which means where the policy is practiced, a server may only collect $19.40 out of each $20 in tips.    
  • California (CA Labor Code Section 351)  PROHIBITS THIS DEDUCTION
  • Colorado (Mininimum wage order 29) Only allows this deduction if the employer pays the FULL min wage of $7.78  Otherwise the practice invalidates the tip credit and if the employer chooses to pay the sub minimum wage of $4.76, they CANNOT also take a deduction for credit card processing fees.
  • Unlike cash tips which are received on the same day, employers are allowed to postpone disbursing credit card tips until the next scheduled pay period.

Statements issued by the U.S. Dept of  Labor from Opinion letters dated March 28th, 1977 and February 26, 1998- FLSA sS 3(m) and FOH3OdO5

“Where tips are charged on a credit card, it is the position of the Wage and Hour Division that the tips due the employee must be paid to the employee not later than the next regular pay day and may not be held by the employer while the employer is waiting to be reimbursed by the credit card company.”

“An employer may deduct an average standard composite amount for tip liquidation, rather than individually calculating the precise charge for each transaction, so long as the total amount collected reasonably reimburses the employer for no more than the total amounts charged by the credit card companies attributable to liquidating credit card tips.  Any employer attempt to deduct an average standard composite amount for tip liquidation that exceeds such expenditures is not acceptable.”

 

Tip Pooling

A tip pool is an arrangement where a directly tipped employee (waiter or waitress) agrees to contribute a portion of your tips to  support staff  such as the bus person, host or bartender that are not directly tipped. The Pool House traditionally only includes tipped employees who are directly involved with service such as food runners, waiters, waitresses, host, bartenders, and buss persons. Listed below are some of the most common methods for pooling tips. Regardless of what type of pooled house the employer may use, tipped employees must be informed of the tip pool practice before they start working.

  • Tip Pool Method #1  Tip Sharing:  This method is to require wait staff to contribute or share a agreed upon percentage  amount portion of their tips based on actual tips received  and/or sales. Ex.   Server agrees to a tip out amount of 15% to busser based on actual tips received If a server made $100 in tips, they must at least tip out 15 percent of tips to a buss person.  In this scenario, the server can elect to tip out more but they can not fall below the agreed upon amount to be disbursed among the staff.  The server also provides the employer with the amount of tips they received after tip out and the amount disbursed. The servers are provided with the daily sales information and know exactly how much food/wine they sold.  They retain tips and surrender only the tips required by the tip pool.  This is by far the fairest and best tip pool arrangement for both the  food server and employer.
  • Tip Pool Method #2  requires wait staff to contribute a portion of tips BASED ON TOTAL FOOD SALES. Ex Server sold $1000 in food and beverage sales and or required to tip out 5 percent of those sales. This method  is not ideal. If a customer fails to tip, the waiter still is forced  to tip out the busser/food runner on sales, not actual tips received or a percentage which means the server assumes the risk solely, not the support staff.  EX.  A percentage of tips are deducted automatically from Credit Card sale amounts not actually credit card tip amounts.Although beneficial for the employer, it does not fairly meet the compensation of the servers. Also, it can cause headaches if the server fails to make minimum wage due to a bad tip.  Another example.  Once I worked at a casino which gave away $500 dinner vouchers to its loyal gamblers. Some of these diners came in with the vouchers, ran up the bill, but then did not tip out on $500. Sometimes these diners left only.$10. I was still required to tip out  a 15 % rate. ( Assuming I made $100, I owed the bussers $20 dollars even though I only made $10. I lost $10)  The result.  These type of diners were avoided like the plague and often received the worst service imaginable.  Angry and dissatisfied, they wrote searing, awful reviews on trip advisor.  My advice: Don’t put your servers in this position. If someone doesn’t tip properly, at least allow for adjustments and share the risk of business with everyone. The servers should not be the only ones who assume the burden of a bad tipper.
  • Tip Pool Method #3  Employer may require waitstaff to surrender all tips to a general tip pool where a manager counts tips and then disburses them among wait staff and other workers such as bussers, food runners or hosts/hostesses.  This arrangement can work well in a small family type setting.  If the employer is trustworthy and the servers trust one another this method can work well.  Tipped employees are encouraged to work more as a team.  This arrangement is not recommended for large restaurants.  In this situation, servers  lose their say in how much they want to tip out and can lose the incentive to sell high end bottles of wine if they must share the success of the sale/higher tip amount with the entire staff.   Often these types of tip pools are more prone to illegal deductions and coworkers may pocket some of their tips instead of surrendering them.  Also, its common for resentment to build among staff who consistently sell more than other servers.

Tip Pool Restrictions:

Tip Pool Restriction #1 According to Fact Sheet #15, The  U.S. Department of Labor states,  “Tipped employees may not be required to share their tips with dishwashers, cooks, chefs, and Janitors.

This tip pool restriction however  under does not apply to employers who do not take a tip credit and /or where state law prohibits a sub minimum wage for servers  THIS IS NO LONGER TRUE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 ON FEBRUARY 29, 2012  THE US DEPT OF LABOR ANNOUNCED THAT MANDATORY TIP POOLING WITH BACK OF THE HOUSE EMPLOYEES IS PROHIBITED REGARDLESS IF THE EMPLOYER ELECTS TO TAKE THE TIP CREDIT OR NOT. FIELD ASSISTNACE BULLETIN NO 2012-2 FROM  THE DEPT OF LABOR STATES:

“Tip pool restrictions should be enforced uniformly across the country including in states covered by the ninth circuit.”

Previously in the 2010 decision Cumbie vs Woody Woo, the 9th circuit court of appeals ruled that tip pool restrictions did not apply to employers who did not take a tip credit. NOT ANYMORE!  States previously impacted by this ruling include: California, Nevada, Washington, Oregon, Alaska, Idaho, Montana, Hawaii, and Arizona

htpp://www.dol.gov/whd/FieldBullentins/fab2012_2.htm

Employers who do elect to take the tip credit and pay their tipped employees a special sub minimum wage are not allowed to also require tipped employees to subsidize the wages of non-tipped workers. When employers do require tipped employees to share tips with non-tipped, employees, the tip pool becomes  invalid and illegal. Such a tip pool allows the employer to pay as little as $2.13 pr hr. They enjoy paying a low wage and a lower fica rate for the non-tipped employees.  When tipped employees subsidize the wages of the dishwasher for example, the employer can get away with paying the non-tipped worker the regular minimum wage, instead of a living wage; thus reducing the amount of FICA contributions they will need to make for the non-tipped worker.

Tip Pool Restriction #2

In all 3 methods, including employers who do not take a tip credit, tips are the property of the tipped employees,  not the owner. In other words, the owner or management may not keep tips for any other purposes than for disbursing among as tips to the tipped employees in a valid tip pool  This means they can not set aside a certain amount of tips to be used later for errors of the pool house or other purposes.  Please visit www.DOL.gov. and search for FLSA Fact Sheet #15 for more info. Also see Field Assistance Bulletin NO 2012-2  @ US dept of Labor

REPORTING TIPS

Tips are recognized by the I.R.S. as supplemental pay, subject to full taxation like any other wage.   These days the I.R.S. uses  documented credit card tips as a mirror, or tool to compare what they believe your reported cash tips should be.  In other words, if your credit card tips are normally around 15%, you should be reporting 15% of your cash tips  to stay out of the IRS radar.  If you report lower cash tips than your credit card tips, you or your employer may be audited and  required to pay the difference based on their estimates.

Rather than auditing individual servers, however,  the IRS  these days seems to prefer treating the restaurant as one unit.   Employers are understandably more nervous and you should expect stricter tip reporting policies as  they face potential liabilities if you under report.   As a food server, you should also have access to information that shows the amount of  your  total gross daily  food and drink  sales even if an employer automatically declares daily tips for you.  As an  employee, you have  the right to know the amount  declared, what portion was contributed to a tip pool and what amounts were deducted for credit card  processing fees.

Also, you should be keeping your own daily  record of both cash and credit card tips, the amount and  any names of people you contributed a portion of your tips to and any credit card processing fees that were deducted from your tips.   This documentation should help in case you are in disagreement with what your employer has claimed for you or if you face an audit.  Remember, your total declared tips are the amount  after tip out and credit card processing fees.

Total reported cash tips + credit card tips minus tip pool, minus credit card processing fees = your total reported tips subject to tax.

Under reported Tips

Allocated  tips are an additional amount of tips determined by your employer and  applied to each server/employee for tax purposes whose reported tips fall below the required percentage. This means at the end of the year, when you file your income taxes, you will have to report the allocated tips and are liable for any taxes owed.

Over reported tips: If your employer is reporting a higher amount of tips than you actually received, you have the right to dispute it.  Some employers who take illegal deductions from tipped employees such as forcing a tip out to the dishwasher will not require the dishwasher to report the tips they receive. Instead, they simply report that the server did receive those tips and the server/tipped employee is responsible for paying a higher tax amount.  You can contend this by keeping a daily record of tips received and reporting these practices to the IRS if the employer fails to make the corrections.

What should I do if my employer reports a higher amount of tips than I actually receive?

You should first point out the mistake to the employer.  At this point it is very important that you keep track of your tips. If you notice your employer is consistently over-reporting tips you especially need to be keeping track.

Go to the IRS Web site.  Download and print Publication 1244, Form 4070 and 4070A . This is the official document you should use to record your tips.  If the employer refuses to stop over-reporting your tips, you can download Form 3949-A.  This document is called a Information Referral and will alert the IRS that the restaurant is providing false information.  (You can be anonymous and not reveal your identity if you choose) This may spark a investigation by the IRS or prompt an audit.

Meanwhile, its important that you and fellow co-workers document your tips.  When you receive your W-2 form at the end of January and it shows  a incorrect amount for total tips earned, you can download Form 4852. W2 correction form.  Fill it out and submit it to the IRS.  The employer will also receive a copy.  If they disagree and assert that their records are indeed correct, you will then mail your documented tips from form 4070 to challenge their claim.  Any other receipts, documents you receive showing tips also keep.  Co-workers who also follow the same steps will help prove your tip income.

You can also contact the Tax Advocacy at 877-777-4778.

Tip  History: A snap shot

1942 Supreme court affirms tipped employees have exclusive rights to their tips.

1965 Congress includes tips in FICA withholding calculations with no employer contributions.

1966 The Tip Credit is created.  In 1966, the Tip Credit is 50%, From there it varies from 40% to 50%

1977 The DOL releases an opinion letter, that  stated that the Department did not question the practice of deducting credit card processing fees from a servers credit card tips.

1988  Restaurants are required by law to pay their own share of FICA taxes on the total reported tip income of their wait staff.

2002 On June 17th, 2002, United States vs Fior d’ Italia, the Supreme Court asserted that the IRS could charge FICA tax on an estimate of aggregated tips. Basically, A San Francisco  restaurant is forced to pay over $20,000. in  FICA  taxes for the waitstaff,  whom the IRS believes under reported their cash tips by examining thier credit card tips and making a comparison. Even though the wait staff reported 10% for cash tips, their credit card tips averaged 15% and the restaurant was penalized for the difference.

2006Dept of Labor releases a fact sheet that reaffirms employers are allowed to deduct credit card processing fees from a servers credit card tips.

2009 The Federal tip credit rises to $5.12 and  exceeds 70%- The highest in its history.

2010 February, The Ninth Circuit Court affirms:  Tip pooling restrictions only apply to Employees who claim a tip credit.

2012, February 29th. The US Dept of Wage and Hour rules that the Ninth Court affirmation is invailid and that mandatory tip pooling with back of the house employees, reqardless if a tip credit is taken or not is prohibited under the FAIR LABOR STANDARDS ACT

79 Responses

  • Zach in TN says:

    Was forced for almost an entire year to tip out 20% of tips to piano player. I knew it was illegal and a former manager turned in our establishment to federal authorities who came in and did a full investigation. It resulted in $1800 being awarded to me. It has yet to be paid but as soon as the IRS collects so will I. Fight the good fight

  • Colleen Osborn says:

    Hi! Just wanted to give you an update. I filed a claim with the dept. of labor, and I get $982.34 (less taxes) back from the restaurant that fired me for not tipping the cook 20% of my tips. Yippee! Thanks for the support, and knowledge.
    Sincerely,
    Colleen

  • Hannah says:

    So i worked for this restaurant for about 3 years and we were required to tip out 4% of our sales. so if i sold $400 worth of food and drink, $16 would automatically come out of my TIPS. not 4% of my tips. so if i sold $1000 but didn’t have very good tippers that night i would still have to tip out that 4% and go home with very little. I have been told that this is illegal, is this true?

    • anon says:

      Since someone else hasn’t answered your question, I will attempt to do so.
      For starters, it will depend where you live because individual states have varying labor laws.
      I am also not not an expert on the topic, but have good knowledge of it.

      Anyway, the answer is yes/no/maybe, but generally speaking it’s not legal. The reason it can be legal is due to multiple factors, and only under the right factors would it be legal.
      1. The law would need to allows splitting a large amount of your tips to others (even if there’s no limit to the amount that’s split, one would still need to get at least the same amount as those whom it’s being split with)
      2. You’re still receiving the minimum legal federal wage (currently $7.25/h— higher in some states) AFTER those tip-splitting deductions (“tip outs”) between what your employer is paying, and the tips you have left.
      3. You’re on-average (possibly even “always”, but it’d only be an unfair problem if it was on-average) earning more than enough to give the amount specified in #1 without exceeding the limit specified in #1 if any— with an override being the amount others are receiving if one wasn’t specified (ex. if it was being split with 4 people they couldn’t deduct more than 80% of your tips since otherwise you’d be getting even less than them)

      If the employer doesn’t know how many gratuities the staff is earning, I’m pretty sure whatever they’re doing is automatically illegal. The amount of gratuities staff earns is a critical piece of information for the business to be conducted legally and without it they couldn’t fulfill their legal obligations.

      So if you’re always earning (or at least on average) 8% tips then it’s very likely legal to deduct the 4% (since even if there’s only 1 person that 4% is going to —which I presume is never the case- it would be split evenly with yourself 50/50). That is still assuming you’re earning your minimum wage’s worth, otherwise the employer would still need to pay more.
      ($5.12/h If your wage was $2.13/h and it’s not a state where it’s higher than the mandated $7.25)

  • Colleen Osborn says:

    I work in OR, where we are lucky enough to get a minimum wage that doesn’t include tip credits. However, my boss now wants us to tip the cook 20% every day, I see tip pooling is set up for those who usually recieve tips, cooks aren’t(?) right? Seems she is trying to supplement the cooks wages with our tips, is this ok? Thanks for this site, I’ve been a server for 20+ years, and wish I had known some of these things years ago!

    • Gina Deluca says:

      Tipping out the cook is totally illegal. When I was waiting tables in CA, our boss asked us to tip out 5% to cooks, which we were willing to do even though it was technically illegal. We knew they had to work harder too when it was busy but 20%!! That is too much and unreasonable and unfair. There is a lot of illegal labor violations going on in the industry and the mechanisms in place to protect your rights as a worker are weak, so you might consider trying to can work something out with her to negotiate the percentage. If she does not want to negotiate, then contact the Federal WAge and Hour to file a claim and recover lost tips due to this illegal tip pool scheme. The Federal Dept of Labor announced last Febrary, that employers who do not take a tip credit must still comply with tip pool restrictions, which means any staff such as cooks, pastry chefs, dishwashers, or prep cooks who do not participate in direct line of service such as host, or busser may not by included in tip pool. Good Luck!

  • Leigh Joyce says:

    I work in SC for a large restaurant chain. Just this week they have told us we will no longer be paid minimum wage for opening shifts. Up until now we have been paid min wage for the duties we perform until the restaurant opens. Is this legal? For years they were very concerned about having to pay min wage in the evening for the work done after closing. Has the law changed that they no longer have to pay us min wage when we aren’t open but they give us duties we must perform. Thank you.

    • Gina Deluca says:

      I need more info. Do you mean the full min wage vs the sub min wage? In other words, they will only pay sub-min wage you perform until restaurant opens and closes? This is ok as long as it doesn’t consume more than 20 % percent of your shift (doing set up/close down cleaning ect) If they are not paying you anything at all until the restaurant opens, then yes this is very illegal and I would document everything, and find a lawyer. good luck

  • Emily LaFantano says:

    I was wondering if an any circumstance an employer can reduce your minimum wage. I am a server in VT and the minimum server wage is 4.10/hr. On my last paycheck the wage after server hours was blank. Granted, I make between $12-20/ hr. However is this legal? If I am an employee aren’t they required to pay me the minimum server wage and then take taxes from that? Thank You!

    • Gina Deluca says:

      On your paycheck, there should be an amount of tips reported plus your hourly wage. They tax you on the tips you earn and report and sometimes your hourly wage is not enough to cover the taxes, so you get zero.

  • Daniel says:

    I’m glad I found this website. My girlfriend works at a restaurant in West Hollywood, CA where they charge a mandatory gratuity of 18% for all patrons (regardless of party size), but do not give a penny of this to the servers! I have a gut feeling that this is illegal in California, but none of the wait staff have filed a compliant or asked for legal advice. Please let me know if this is worth pursuing… thanks!

    • Michelle says:

      If a charge is labeled as a “gratuity charge” it is not taxable BUT it MUST go to the waitstaff. A service charge does not have to go to the waitstaff and IS taxable. An employer cannot have have their cake and eat it too in this situation. I’m sure it happens more often than not. It’s up to the employees to know their rights and enforce their rights. There is a lot of cheating on taxes in the food service industry and the IRS welcomes your information about cheaters. Sure you may lose your job, but trust me, you don’t want to work for someone who will cheat you out of your money. If they do it once, they will do it every chance they get. My best advice, document every fraudulent action they make for a period of time. Demand that they stop, and when they fire you, go see a lawyer.

    • Gina Deluca says:

      Yes, this could be illegal if The owner is failing to disclose that the service charge is not acutally being disbursed to wait staff. It is fraudulent and misleading. Contact CA wage and hour, ask to speak with a supervisor and inquire about specific State statues regarding this. If other wait staff are willing to join your girlfriend, then yes, this could be worth pursuing as in class action. If not, well then it may not be. In the meantime, she should be keeping documentation. Keep in mind though, service charges are the propety of the employer as long as they are not misleading the patrons that they are in fact a grutities for wait staff. And tips are the property of the server, not the owner. Good luck!

  • c. C. says:

    I am a server in a restaurant in Texas. I had a customer slip out the door with an unpaid $60 bill, when I went in the kitchen. I was unable to catch her and at the end of my shift my manager expected me to pay for it. Is this right/legal? She then told me that she would half the bill. I told her that I didn’t even make $30 in tips! Is it my responsibility to enforce payment on ALL my customers when I am busy with other customers? How can I be expected to watch the door constantly AND still be a good server? It is absurd. Can someone comment please?

    • Gina Deluca says:

      This is illegal but all too common a practice. If you don’t pay up, the employer will likely fire you. In Texas, you only have the Fed wage and hours guys to file this claim with. You could keep documentation of this transaction (being forced to fork over monies for a walk out) and hopefully you already keep a daily record of your tips. You could file a wage claim later after you find a new job- you have two years to file. Then you would have a reference and time to find hopefully a better job- but you could still nail this employer for this later. Or you could contact a lawyer if this practice along with other violations is widespread among employees. Its all about time and energy. How much can you recover? Is it worth it? If you have other people willing to stand by you and a class action suit is a possibility, well then that might be worth it. If you are struggling to make ends meet and really need this job, go about it very carefully. Cover your bases, act later.

  • Chelsea Cordelia Raymond says:

    I just got my first waitressing job. I work in Bowling Green, Ohio at a Japanese/Thai restaurant. I am very confused about the way my employer pays us and makes us tip out.

    My duties include set and break down table settings for before and after shifts, fill soy sauce bottles, prep to go condiments, fill ice dispenser in soda machine, hostess, bar tender, make a couple menu items, server, busser, dishwasher, phone, take to go orders in house and on phone, cleaning server’s station/tables/bathrooms/floors in dining area, cashier.

    I make $3.50/hour. At the end of my shift I pay the house 10% of total sales (excluding to go orders). This money gets split between the sushi chef and the kitchen chef who are salaried workers. I have to pay this amount to the house regardless of whether or not the customer tips. Is this legal?

    • Gina Deluca says:

      Tipping the sushi chef may be allowed, but tipping out the kitchen chef is defiently illegal. I am a little confused- Does the tip out come out of your $3.50 hour salary as well? You tip out 10% regardless if customer tips or not. You should have direct control over your tips. Start keeping track of your tips- Write down everything. How much you make, how much you tip out and the full names of the people you tip out. Keep a journal and date everything. Keep copys of credit card tip receipts. Any thing to prove your case, then file a claim with the State Wage and Hour to recover your tips. If they don’t help you, You can try contacting the Federal wage and hour. Also, if you are spending more than 20 % of your shift cleaning and not serving tables, they must pay you the full minimum wage in Ohio. I don’t how long you have been working there, but if it has been for a while try aligning yourself with other tipped workers and talk to a lawyer who can help recover your wages. Be prepared to lose your job if you stand up to this employer. On your next shift, you can refuse to tip out the chef, its your money and they cannot force you to surrender these tips. If you want, you can let them know they are breaking the law and you would like thier tip policy to change so that it is legal and fair. If they fire you, file for unemployement. Good luck

      • Chelsea Cordelia Raymond says:

        i learned this weekend that the 10% that comes out of my daily earnings that the owner says goes to the kitchen and sushi chefs doesn’t really. it goes into a a pot at the end of each night and then the owner (who sometimes walks around doing a little of this or that but definitely never truly works a shift at all) takes a large cut, some of which he keeps and some of which he uses to pay the chefs wages (not to tip them), the next largest amount is taken by the second in command which is the second sushi chef, and the remainder is taken by the third sushi chef. the first and second cuts are taken by those to regardless of whether or not they worked that night.

        • Gina Deluca says:

          This is very illegal. You need to be very diligent about keeping records of your tips, what you are required to tip out and the names of the people who take these tips. Present this to wage and hour. If you have a camera or cell phone with camera, take a picture of the “pot you are required to contribute tips to, if possible. Keep copies of your daily sales if possible (jot it down somewhere every day you work) document, document document! Be fore warned that if you pursue this, the wage and hour dept may still take the employers word over yours. You have to be able to prove this practice. If you bring this up with your boss, there is a good chance they will fire you, and you might not win your wage claim, but if you can afford to take the risk, GO FOR IT! The best of luck.
          Gina

    • Chelsea Cordelia Raymond says:

      i ask if its legal because of the amount of extra duties i do (which probably amounts to 20% or more of my time but it would be hard to calculate), and also because my tip out is going to salaried workers.

  • Cortney says:

    I waitress at $2.13 an hour. At the end of out shift we are required to tip the manager. The manager is responsible for seating tables, taking to-go orders, and if NEEDED will bus our table. They do not always bus our tables or do anything for us besides seat the guests. They are obviously getting paid way more than I am and I just think it’s silly that we have to tip them out. Is this ok?

  • John says:

    Support the fair tax it will end this mess.. http://www.fairtax.org please learn about it

  • Michelle says:

    Can an employer force you to tip out a new server trainee? I work in New Hampsheir.

  • JennS says:

    My questions is when tipping out can an employer change the amount? I get paid every 2 weeks. My last 2 checks have been short around $20 in tips. I think my employer is changing the tip out after I have filled it out and claimed my tips. We have a percentage to tip out SA and bar. What is sad is they are guaranteed money from me with or without performing there job. I get paid on performance they should to. After working 20 years of my life in hospitality I am over it!

  • kim says:

    You know what I want? Some type of tax break for keeping some of these people paid. I work in Fl. at a Prime Steakhouse. Tipping out any amount of money due me be it 3% up to 15% I say makes me an employer. Im sick of the company thinking their doing favors so they can have complete over staff. I want a tax credit like them.

    • Michelle says:

      You do get to deduct the amounts you tip to other people in calculating your tips. My question is, do you claim ALL of your tips or just what you have to? If you’re not reporting every penny of your tips, you’re already taking your own little tax credit.

  • anne says:

    One more thing, I plan to request the server reports with c.c slips attached so that I can double check how often the report tip amount is higher than the sum of the actual slips. I know these are kept for his records but since it pertains to me and my tax info I do reserve the right to request this documentation don’t I? I’d also like copies of a few of the paychecks (void) that I have misplaced. Comments?

  • anne says:

    Hello,

    Here are my questions;

    I work in WV and we are told to tip out the bartender 10% of alcohol sales, but these are tips that are recorded under my name and I am taxed on. We are also told to tip the host and dish people, also money recorded under my name and on which I end up paying the taxes. How and is this legal, if I have to do this shouldn’t that amount be deducted from my recorded tips.
    I have also been receiving Void paychecks, at times the hourly wage equals that of taxes taken out resulting in 0.00 other times the hourly wage (tips recorded and included) with taxes taken out still yields a remainder, which I would assume would be the amount for that paycheck. In this instance however the check is also Void 0.00.
    There have been times that the total of credit card tips when added up are less than the c.c. tips printed out on my server report, any ideas why?
    When asking my boss about this he said he “didn’t know, can’t we just finish up and get out of here?” So many vague and lame answers, I’ve tried reading labor laws etc. but am looking for laymen terms. Can anyone help me out with these questions?
    Thank you.

  • Katie says:

    I work in a small family owned resturaunt , we have a new rule that if we make a mistake adding a ticket we must pay this back at the end of our shift, is it legal? We have no margin for error what so ever

  • Megan says:

    I have a question, I as the bartender have recently been required to manually do the tip out for all of the servers. On top of all of my other duties, I must calculate 3 or 4 percent (depending in the day) of total sales for each server, add that up and distribute tip out to hosts and food runners. Then I must do a similar thing for the bartenders tips. I feel like I shouldn’t be allowed to see everyone’s wages and also I do not enjoy the responsibility if everyone’s dealing with do much money that does not pertain to me.

    Please help, I’m looking for advice so that I don’t get demoted for complaining.
    -Megan Crudgington
    megancrudgington@my.unt.edu

    • Gina says:

      This is a common practice that really should be allocated to a individual servers or a manager. But the practice is not illegal as long as the servers have access to this information along with the option of editing the info and that you are not held responsible for any shortages in the bank.

  • jerry says:

    I have a question at my wifes work they charge a percentage on her credit card tips as a (processing fee) I know that is legal to do however she is being charged a 10% processing fee. Is there a federal law against banks charging that high a processing fee? I was under the impression that it was something like.24 cents a transaction plus a small percentage. if he is lying about that an profiting of this charge is there anything that can be done and how could you find out what he is really being charged from the banks.

    Thanks

    • Gina says:

      It illegal for the restaurant to charge more than a 3% processing fee which is the industry standard. Anything more than 3% is excessive and your wife can file a wage claim to recover those lost wages. She should start documenting, keeping receipts of these transactions. Good Luck

  • kate says:

    I have a question , I have lots of questions but I will start with one or two ? I work in a resturant that seats close to 300 ppl as a food server, I find some of the rules not right.

    If we have a new girl on the floor with little or no experiance, we are requirred by our employer to hand over half of our tips, I work in a pooling situation, which for the record is not always a good thing .I find it an insult after working for year asa food serer to hand over half my money to someone that has no idea what they are doing, my question is, can we be made to do this ?

    another question, while being called in for many many staff meetings ovr the years, on our days off, we have never been paid a dime. can my boss do this ?

    • Gina Darnell says:

      Unless the state you work in does not allow compulsary tip pooling with other tipped employees, then yes the employer can control the tips in this manner. 2nd question. Yes the employer must pay you to come in for staff meetings. Keep flyers from the meeting as proof you had to attend. Keep record of the hours for these meetings. You must be paid FULL min wage for these meetings, not the subminimum wage. You have usually two years to file a wage claim, so you might find another job first, then file through wage and hour for wages for those hours from the staff meetings.

  • lori says:

    I work in a family owned restaurant and lounge we are charged 3 percent of our sales which includes our tips and taxes for our busser fee with a cap of 20 dollars per night. my question is our bussers are paid the regular minimum wage for our area which is 7.70 an hour. they do not receive those tips our boss puts the tips that we each pay to him in his account and that is how he pays for their wage is this legal?

    • Gina Darnell says:

      In a nutshell illegal. The bussers are considered tipped employees and the employer can pay them a special subminimum wage, just as waitstaff also recieves a special subminimum wage. If the busser’s do not make enough in tips from the waitstaff to earn the full min wage. tips+ sub min wage, then this employer would have to make up the difference. Sounds like he is just paying the full min wage and pocketing thier tips for himself. In other words, the bussers no matter how slow or busy make the same amount and the employer can do well when it is a busy night and the wait staff does well. This employer essentially skims off the tip pool of the waitstaff and the bussers are the real losers in this situation. so are the wait staff- what incentive does the bussers have to work harder when its a busy night? Or does this employer throw crumbs at them once in a while? Enlighten your bussers!

      • Gina Darnell says:

        Just want to add- Tips belong to the tipped employee not the employer! Those tips that are being deducted for the bussers are property of the bussers! If you the wait person designate a tip to be disbursed for a busser or pool house, it must be recieved by those recipents. Good Luck!

  • Bridget McC says:

    My son started working at a dinner theater and is paid $4.75 hr (server wage) he makes $8-$10 tipped by the server per 8hr night.
    I think his employer should pay the minimum wage am I right ?

  • Mak says:

    I also have a legality question. I worked for a restaurant in NYC that did not provide wages, but it did pay our taxes. We saw no money outside of our tip earnings. Even if they had a low hourly rate (I don’t even know what it technically was), is this legal?

    • Michelle says:

      I think you may be mistaking getting a paycheck with a zero amount with not being paid. By law, you have to make minimum wage at the end of the week, through tips and hourly wages. If you work 40 hours in a week, you must have $290 at the end of the week. You may have reported $190 in tips and you check must be at least $100. However, your federal tax withholding, SS tax, Medicare tax and state tax will be taken from that amount, and most of the time you won’t end up with a check for that week due to payroll taxes. The least amount of gross wages you can be paid in a week is $85.20 (unless your states minimum wage is higher than 7.25). It just happens that your payroll taxes will usually eat that up.

  • Carolyn says:

    I work as a server in Virginia for a non-franchise restaurant. Many of the servers have been promoted from cashiers, and the boss often has us cover cashiering shifts, but we never get paid for this, because he says the tips from serving cover out cashiering shifts. Now that times are bad, he often has us cover one or two shifts a week, and we never see any money for doing this b/c of the money we make from serving. He says he cannot fix this b/c we only have one social security number, but it seems very odd to me. Does anyone know if this is correct? Is it legal? He also has us as servers cleaning bathrooms and moping the floors, but we never receive more than the 2.13 pay rate. And we also never see this money b/c our tips cover it, so all our checks are void. Any insight anyone has to this matter would be appreciated.

  • Carla says:

    So my employer just decided to put up a notice stating that if a video poker winner tips you out of their winnings that we must give them to her, this is in Oregon. Is this legal? I have contacted the Oregon Lottery and they say there is no such rule from their end.

  • katherine says:

    Mark – January 11, 2012 at 5:56 pm
    – This was a little confusing to me, too – so I researched it – 15% of the sale. But at the end of the night you report 15% of your total tips – which could makeup for this loss.

  • katherine says:

    Aryehl – January 25, 2012 at 6:27 am
    – I would never sign the form you did – it seems it may have taken away your rights. Call the number I gave in an answer to Hedi. I would always keep track of my tips – it is your money. If you have no idea what you are earning how can you complain of the slave labor?

  • katherine says:

    Heidi = February 4, 2012 at 3:13 am
    – You can also contact the Tax Advocacy at 877-777-4778. As stated here in this article – it’s important that you and fellow co-workers document your tips. When you receive your W-2 form at the end of January and it shows a incorrect amount for total tips earned, you can download Form 4852. W2 correction form. Fill it out and submit it to the IRS. The employer will also receive a copy. If they disagree and assert that their records are indeed correct, you will then mail your documented tips from form 4070 to challenge their claim. Any other receipts, documents you receive showing tips also keep. Co-workers who also follow the same steps will help prove your tip income.

  • katherine says:

    Nick, February 21, 2012 at 3:21 am
    – Your girl friends checks can be held until the next pay period if they are credit card sales. Anything else she should have control of. She must report the amount but she should be paid on cash sales before she leaves for that day.

  • Amy says:

    i live in alabama. my restaurant requires that all credit card tips are paid out via paycheck. at the beginning of the year, he moved our declared tips over to an “hourly” basis. example: you make $400 in tips over a pay period. instead of keeping the tips separate from hourly and in their own section, he has moved them under hourly so 400 hours at $1/hour. is this legal? and are hourly wages taxed differently than tip wages? he also rounds our tip total up or down (if under .50 the total rounds down & over .50 the total rounds up) to make the dollar amount even. is this legal??

  • Yoselin says:

    I recently started working at a new job. I was told that the owners dont give credit card tips because they keep them to distribute as a “big” check until the END of the year. Is this legal? Also if you quit or get fired, you dont recieve the credit card tips you earned through your time working there.

  • Nick says:

    My girlfriends restaurant just started a policy where they are not going to give them any of their tips until the end of the week in one “big” check. Is this legal at all? sounds more like with holding wages or something to me. this is in washington state.

  • Cat says:

    A lot of these questions are answered by searching for the Fair Labor Standards Act #15, http://www.dol.gov/whd/regs/compliance/whdfs15.pdf

    Hope this is of some use!

  • Heidi says:

    if my reported tips on my paycheck are showing more than i am making how can i change this. where i work we tip the bar 5% on our liqour sales and our support staff get 3% of our total sales. At the end of the day i am tipping out anywhere from 30-35% of what i am making. This large amount that i am tipping out is not being deducted from my claimed tips, which are claimed for me. Is this illegal or is there some law saying they can only claim my tips after what im tipping out which is recorded by managment as well. Do i need to constantly keep track of every dollar I’m tipping out and every dollar I’m leaving with to fight this?

  • Aryehl says:

    I work at a popular establishment, where we are forced to sign waivers that allow the store to keep a non negotionable .39 cents per hour (with no cap) for “employee meals” wether we eat them or not; we are foreced to pay for walkouts as well as any other scenario where the store may come short. For example, I was forced to pay the balance of a meal becasue the customer’s gift card did not work even though it had the correct balance on the card. Servers are made to wash dishes and bus our own tables both in the presence of a Dishwasher and without one. The store operator, district manager, and general manager have recently announced that we must automatically claim minimum wage with no regaurds to our tips–even on nights where our server reports show that we only had 3 or 4 tables! Is there anything I can do about all of these practices? or should i simply resign to recording my tips by hand and challenging the forced claims at the end of the year?

  • Phyllis says:

    I work in a family owned business that routinely charges employees $40.00 for a lost check and for cash register shortages when they provide no managerial support. We hand write checks and they also charge employees for any miscalculations. It is a 24 hr establishment and they are only here from 9am to 3pm. Other than that there is no management on site. They also underestimate cash tips so they will pay less into social security for the employee. When I requested them to claim more tips for me to qualify for a home loan I was made to pay the additional amount of the employers share of social security. I reside in the state of Georgia. Is any of this legal?

  • Mark says:

    Fantastic summary, this has been very very helpful to me! I was confused in a few places and thought I would ask about it, risking the chance that maybe I’m just being a pestering asshole, but I’m honestly confused by these sections:

    On a $500 dining bill where the customer uses a gift card:
    “Sometimes these diners left only.$10. I was still required to tip out a 15 % rate. ( Assuming I made $100, I owed the bussers $20 dollars even though I only made $10. I lost $10) The result. These type… ”
    Does that mean tipping out at 15% of sales, or 15% of tips? Was the $100 you made from other customers, or did that include the $10? Does the $20 you paid to the bussers constitute the complete tip out amount?

    Is this correct: “if your credit card tips are normally around 15%, you should be reporting 15% of your cash tips to stay out of the IRS radar”? Should it read “…15% of your cash SALES”?

  • justin says:

    ive worked in resteraunts for 23 years this december i worked a resteraunt buyout so the company got paid but the tip went in the payroll and this our bussiest week of the year can they tax our tipps into nothing most of us got little or no paychecks does this make sense plese help justin oc california.

  • Cindy says:

    I have been in the restaurant business for 13 years now and have always been told that if a table walks out on you or your cash out is short, by law the restaurant can not make you pay that. Well tonight we had a walk out and the server was forced to pay and was told that the law was a myth. Can someone please clear this up for me so I can have a better understanding. I know this is not about wages but it still involves tips.

    • Gina Darnell says:

      Not a myth. The law. The only deductions allowed are those that are authorized by the employee. Taxes and the tip credit, thats it. This server should keep any kind of reciept, documentation of being forced to pay and promptly make a wage claim with wage and hour.

  • Janet says:

    My daughter recently began a waitressing job. They pay less than min. wage and she gets tips. She is required to stay 3-4 hours after customers leave to clean the restaurant. Is the restaurant required to pay min. wage during those hours when she cannot earn tips?

    • Gina Darnell says:

      Not legal. Applebees was sued by workers for this very reason and lost. They had to pay back servers who spent more than a third of thier time doing “sidework” the full minimum wage. The amount of time your daughter is spending doing side work disqualifies this employer from taking the “tip credit” and paying her the subminimum wage. Talk to an attorney or wage and hour Good Luck

  • john says:

    My wife works at a restaurant in alabama as a server and they make her claim more tips than she actually made so her wages equal minimum wage and occasionally close her out themselves. Is this legal?

    • Gina Darnell says:

      Not legal, but very common. The last restaurant I worked at pulled this. This is why it is very important to record tips every day. I was able to march right in and show my records. They corrected the mistake. If they hadn’t, I would have continued recording my tips and notified the IRS so I would not have to pay taxes on unearned tips. The south is pretty tough. Its a high violation area with little rights for workers. Trying to go to the Federal wage and hour to enforce the tip credit provisions can be frusterating and unproductive. Your wife should wait a while and hire a attorney that specilizes in FLSA and go into with other workers. Good luck

  • David says:

    At my work, when in training, one of the videos tells the trainees that a low tip total is translated as poor service and that waiter/waitress will either be required to complete more training or will no longer wait. I can understand the theory of bad service=poor tips, but this statement really bothers me. It seems that the company is trying to scare the waiters or waitresses into declaring a certain amount of tips, no matter how much they actually make, so the company can protect their tip credit. Granted, they also say it’s the law to be truthful about tips. But, this method seems kind of sneaky on the company’s part. What are your thoughts on this?

    • Gina Darnell says:

      Many factors can impact a servers tips. Sometimes new restaurants will overstaff the floor making it hard for a server to make even min wage. But often when the food is decent and menu prices are mid-range and the floor is not overstaffed, most servers should average at least 15% (granted some regions in the country may influence this). On the west coast, my experience is that most diners are far more generous than the diners I have encountered in the Mid-West or South West.
      Because the IRS can now make assumptions about tips based on credit card tips (Fior d Italia vs IRS), restaurant operaters are nervous. The IRS tends to audit the entire restaurant rather than a individual server. What does this mean? It means if the IRS Looks at the credit tips recieved by all servers for that restaurant and the average is around 15%, they will expect that cash tips to be the same. I personally do not declare anything above 15% in cash tips, and thats my right.

  • meg says:

    I recently heard that we will be receiving tips from ccards in our checks. How will we tip out the 30 percent that we normally do weekends to bussers runners bar? Very interested to see this !

    • Gina Darnell says:

      They will probably automatically deduct the “tip amount” for bussers, runners, and the bar from your TOTAL credit card tips or from your sales. I personally hate this system. If they deduct a certain amount from cc sales, then only you the server assumes the risk. In other words, a diner may leave a 10% tip, but you still tip off a percentage. If you sold $200 in credit cards sales and you are required to tip out 30%, they will deduct $12 no matter if you made your $40 or not (20% tip). If it is based on actual sales, then you will not assume this risk.

      Make sure you keep track of your credit card tips. RECORD them daily. Have a total amount of tips to compare on your paycheck. If they deduct a portion for tipping out the buss, runner, bar, =Verify that these employees acutally do recieve these tips. If not, they are stealing. With this system, BE SURE YOU KEEP TRACK, otherwise they may try to sneak in other deductions as well, such as a processing fee, tips to manager etc, Just keep track.

  • Gina Darnell says:

    Standing up for your rights always involves risks. Your best bet is to stand together with your co workers. Agree to be wittnesses for one another if you decide to challenge this practice. Make sure you keep documentation for any walk outs you were forced to pay for. If Texas is a one-party state (this means you can tape record a conversation with out the consent of one of the parties) You must be in the conversation, thus the one party consent- then tape your conversation with the manager discussing this matter, then take your evidence to a lawyer. This illegal practice is pretty common and the only way to curb it is by standing up.

  • Gina Darnell says:

    If 10% of your credit card tips are going directly to the owner/employer and not other tipped employees, contact wage and hour. If you have documentation of this, consider hiring a lawyer who enforces labor law and FLSA provisions. You may be able to recover not only the credit card tips but the difference in the full applicable Federal min wage as this employer clearly violated FLSA provisions. Also file for unemployment . State your case that Retaliation for challenging a illegal deduction from your wages resulted in your termination. You may just win.

  • Gina Darnell says:

    The employer may only hold your credit card tips not the cash. The pooled house has a right to know the exact breakdown of the tip schedule for every day. The DOL does not impose any caps on the percentage a employer may require the pooled house or server to share when they do not take a tip credit. Contact the local wage and hour, ROC-united for more info and consider hiring a lawyer.

  • I’ve noticed that when I’ve been receiving my paycheck that the credit card tips I made for the last two weeks were taken out as the total amount. I asked my boss why he was taken the entire amount out and he said he has to for tax purposes. I’ve been doing this for quite a while an I know that they are suppose to take a percentage out, depending on the credit card company not the entire tip amount. I told him that what I’m making on a daily basis he is taking out the entire amount on my paycheck. So I’m really not making anything. Ineed back up on this because these people are snakes but I would like to stop them. Thanh you Maureen

  • layla nelson says:

    I just started working at a restaurant in my hometown and they have a tip pooling system in which the cooks recieve 50% of our tips, cash and credit. This restaurant has regular dinning tables as well as Hibachi tables (electric stoves at which diners sit at and the cook makes their meals in front of them). The cooks are part of the service just as much as the servers so I don’t mind that we pool and share 50% of our tips with the cooks that cook at the table. I always keep track of how much money I take home and how much of it was credit card tips and how much of it was cash tips. I recieved my first paycheck and the restaurant claimed 100% of the tips that were made for the two weeks on my paycheck including the tips that were tipped out to the cook. So, I recieved 50% of the actual tips and 100% of the tips were claimed on my paycheck and taxed from me. The cooks don’t have to claim any of the tips they make. So, in fact I am paying taxes on money that the cooks made and money that I never recieved. There are 8 restaurants of this kind in the state that I live and half of them are owned by the same owner that runs the restaurant I work in. They have been open for almost a decade and this is how things have been run at every restaurant. I know this is illegal, what should I do? I have not worked there for very long and do not know very many employees, and feel uncomfertable saying anything to them. However, I feel this is very unfair and they should not be allowed to run a business like this. On the other hand this place has created jobs that people here need and I feel if I say something or try to do something I will get in a whole mess of things I do not want to deal with.

  • Estella says:

    I worked for this employer for two months for new restaurant he just opened up, it took two months for us, to get paid our min wages stated by law, and he did reported our tip as a lot more that we made for the first month as the restauran opened up during winter snow there was bearly any business. Also I received a noticed from IRS that I owe money in Taxes for the reason I didnt reported earn income for the 2009 year , with the same employer the fact is that I didnt work for the employer during that years, how can the employer repor income from that years when i didnt work for, also I live in TN, and i find out the most Mexican restaurants dont pay the servers minimum wage set by law, some owners make employes work 7 days a week no days off ,but people dont say antyhinf because most of them are ilegal and get paid cash, I’ve worked for another placed were owner told me that he didnt pay the minimum wage because you had to py for the food if you wanted to eat there, and that was the reason, so i told the owner i would bring my own luch and i wanted to get paid, cause I needed to pay on SS, fica and whatever else you have to pay in to, weel he told me that if i wanted to work there the he would pay my taxes but that I would nt get pais the hourluy wage, i needed the job so I stay , two month later he came to me was giving me check to signe it was made to my name, he said he needed to pay someone else and that I neede to sign that check , I told him i would do no such thing and that I didnt work that way and left, that was almost last year, can i still report this employer to the Labor Board?

  • Tara says:

    I live in WV, I’m a bartender. My employer takes 40 percent of my credit card tips. I was tipped 400.00, and he got 160.00 of it. …. is that even legal?

  • TK says:

    I work in a restaurant that requires us to tip out 5 % of our sales. This means if I have 1000 in sales I owe the store 50. The tips are 2% to the bar and they say 1% to the busser ( the busser never receives this pay he is paid min wage and nothing more) 1 % to the food expo she also never receives the money she receive min wage and nothing more and 1 % to the house. The 3 % that is unaccounted for is what bothers me. How can they do this? Also they claim our tips for us we cannot challenge this sum of claimed tips either. So if I have 1000 in sales 200 in tips they take 50 automatically but they still claim i made 200. Meaning i claim more then i make bc they claim it for us. I have repeatdly asked them to lower my claimed tips to my actual tips but to no avail. What should do now is this leagal?

    • Gina Darnell says:

      Thanks for your comments! You raised some great questions- such as employer reporting more tips than you actually receive. I was inspired to do some research, talk to The IRS, and wrote a new chapter wise up on your paycheck. You will find some answers to the questions you raised there. Thanks!

  • xaviera says:

    i work at a upscale resturant in NJ. our employer has it set up where servers have to “beg” the bartender at night to recieve cash for our earned credit card tips. now its supposed to be if there ‘s extra money in the register the bartender should pay. they start off with 200$ at the beging of the shift and must end with that. so the only way EXTRA money come about is if a table pays their bill with cash. well now at the end of our shift we know we gave lets say 300$ cash the whole night the bartender says the owner told her she has to pay out the bus boy and the dish washer since their illegaly here and get paid under the table!! so after that 300-200$ she has 100$ left and has to pay her closing fee of 50$ to self now leaves the servers (all 3) with 50$ to share! so we deduct the amount paid to the amount owed and acumalate “server reports”. their are employees with 500$ in “server reports” i currently have 400$ in server reports over 2 weeks old. what are our rights ,when we speak up the owner says theres no money. where is our credit card tips going? please help

    • Gina Darnell says:

      If you are payed bi-weekly, they MUST INCLUDE those credit card tips that were not disbursed for that pay period. Although employers are allowed to withhold credit card tips, they can not make you wait any longer than the normal pay period schedule. Does this place generate over $500.000 a year? If so you can contact Federal wage and hour. If not the state will have to step in. I would recommend pulling the wait staff together and hiring a wage and hour attorney. There are treble laws in many states which means you may collect three times the amount this employer is illegally withholding from you. I believe if you stood up to this employer, they would suddenly find a way to pay out each night. The other option is to make a wage claim through the state. The more of you the better. Be warned though, state employees are notorious for giving out false info. don’t take anything granted and be firm. The Feds might be easier. I would also contact ROCNY.ORG 212-343-1771 Although they are based in New York, they can often offer invaluable advice. The bottom line. What they are doing is illegal and they owe you some money. Its great that you are keeping records, make sure everyone is doing it and work together if possible with the entire wait staff to challenge this practice. Good Luck!

  • Me, The JerBear says:

    Excellent information!

    Keep ’em coming!

    Dignity and Respect
    Me, The JerBear