What is a tip credit?

Hi, I’m Innessa Huot and I’m an employment attorney. Restaurants are allowed to take what’s called a tip credit against the hourly wages of their tipped employees, which means that they’re allowed to pay them less than the minimum wage as long as they make enough tips to bring them over the minimum wage. And if they don’t make enough in tips, then it’s the employer’s obligation to make up the difference.

Now the minimum wage varies greatly from city and state, and so the permissible tip credit also varies depending on what state or city you work in. But what’s important to know is that restaurants aren’t even allowed to take a tip credit if they have you spending more than 20% of your time doing non-tipped work. Now that includes things like cleaning the restaurant, rolling napkins, marrying the condiment containers. Under such circumstances, you have to be paid the full minimum wage. Also, in some states, restaurants aren’t allowed to take a tip credit unless they provide you with an official document called a Notice of Tip Credit, which fully lays out your rights.

Now if you think you haven’t been paid correctly or you have additional questions about how tipped employees should be paid in your city or state, give us a call and we’d be happy to speak with you so that you can know more about your rights. Thank you so much for watching.