May an employer count automatic gratuities for large parties as a tip credit against the minimum wage?
Author: Michael Cardman, XpertHR Legal Editor
No. A compulsory charge for service, such as the automatic gratuities that many restaurants charge for parties of six or more, is not a tip under the Fair Labor Standards Act (FLSA). Because it is not a tip, it may be counted neither toward the FLSA's tip credit nor toward the $30 monthly minimum that employees must customarily and regularly receive to be eligible for the tip credit. However, sums distributed to employees from compulsory service charges may be used to satisfy the employer's minimum wage and overtime obligations under the FLSA.