Employees in a restaurant setting often receive tips, and employers often take a “tip credit” toward the minimum wage that they have to pay (allowing the employer in Arkansas to pay $2.63/hour to the tipped employee if the tipped employee receives at least $8.37 per hour in tips to make up the difference between $2.63/hour and Arkansas’s $11.00/hour minimum wage). “Tip pooling” is another common practice, where all of the tips are collected and then evenly distributed among the restaurant’s employees. However, if employers choose to implement a tip pool or tip credit, they must keep the following guidelines in mind to make sure that their tipping policy complies with the FLSA.
Can non-tipped employees receive payments from a tip pool?
An employer who does not take a tip credit (i.e., who directly pays all employees at least $11.00 per hour irrespective of the amount of tips received) may allow employees who are not tipped employees—such as cooks and dishwashers—to participate in a tip pool. This type of tip pool has one limitation: managers and supervisors are prohibited from taking part in the tip pool.
What if the employer takes a tip credit?
If an employer chooses to take a tip credit, the guidelines get much more complicated. An employer who takes a tip credit may only allow employees who customarily and regularly receive tips to participate in the tip pool. This means that those employees who do not customarily receive tips—such as cooks—may not participate in the...
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