Tip Credit and Tip Pooling by State and Municipality

Author: Susie Wine, Littler

The federal Fair Labor Standards Act (FLSA) and many state and local minimum wage laws allow employers to claim certain employees' tips as a credit toward the minimum wage. An employer must comply with whatever standard - whether federal, state or local - is most friendly to the employee.

The following information is summarized on this chart:

• Minimum Cash Wage and Maximum Tip Credit: In states and localities that permit employers to claim a tip credit, the current minimum cash wage and maximum tip credit are listed. (Upcoming changes in those amounts can be found in the state sections of the Employment Law Guide.) The states and localities that prohibit employers from claiming a tip credit are marked as "Prohibited."
• Tip Pooling: Tip pooling is an arrangement by which employees' tips are pooled together for redistribution among other employees. States and localities that expressly allow tip pooling are marked as "Allowed under certain conditions." States and localities whose laws specifically state that tip pooling is not prohibited are marked as "Not prohibited."
• Notice Requirements: States and localities that require employers to provide tipped employees with certain notifications specific to the tip credit are marked "Yes."
• Recordkeeping Requirements: States and localities that require employers to keep and maintain certain records specific to tipped employees are marked "Yes."

States and localities whose minimum wage laws are silent regarding these subjects, or that have no minimum wage law, are marked N/A. In these states and localities, employers covered by the FLSA should follow federal law.

Where applicable, the chart links to the Employment Law Guide for further details, as well as other tip credit issues that are beyond the chart's scope, such as service charges, credits cards, dual jobs/sidework and employee property. Where Employee Notice provisions are only part of a required poster, the chart links directly to XpertHR's poster landing pages.