Vision Payroll

July 15, 2011

Question of the Week: What Is the Impact of Not Providing a Tip Credit Notice?

What is the Impact of Not Providing a Tip Credit Notice?
What Is the Impact of Not Providing a Tip Credit Notice?
This week’s question comes from Tony, a restaurant owner. I read that restaurants should obtain a signed tip credit notice from all tipped employees. What is the impact of not providing a tip credit notice? Answer: Employers who do not provide a tip credit notice are not allowed to take the tip credit.

Minimum Wage for Tipped Employees May Be Lower

Current federal law requires most workers be paid a minimum wage of $7.25 per hour when an employee works forty hours or less in a week. For tipped employees, the minimum cash wage is $2.63 per hour as long as the employee receives enough tips to bring the hourly wage up to at least $7.25 per hour. Some states may have higher minimum wage rates that must be followed in that state. See our Minimum Wage Chart for further information.

Under FLSA, Notice Is Required to Take a Tip Credit

Under §3(m) of the Fair Labor Standards Act (FLSA), a tip credit is not allowed, “with respect to any tipped employee unless such employee has been informed by the employer of the provisions of [the tip credit].”

Employers Must Pay Full Minimum Wage

Employers who do not provide a tip notice and therefore are not allowed a tip credit must pay the full hourly minimum wage of $7.25 per hour the state minimum wage if it is higher than $7.25 per hour.

Contact Vision Payroll Today

Contact Vision Payroll today if you have further questions on the tip credit notice.

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