Tips belong to the workers who earn them, not the employer. Federal law sets rules on tip credits and pooling, and states often add more protection.
Tip credit
Employers may pay a lower cash wage to tipped employees if tips bring them up to at least the minimum wage, depending on federal and state rules. Some states require employers to pay the full minimum wage before tips. If tips fall short, the employer must make up the difference.
Tip pools
- Employers cannot keep any portion of tips.
- Managers and supervisors generally cannot share in tip pools.
- In some cases, back-of-house workers may be included if the employer does not take a tip credit.
- Employers must follow notice and recordkeeping rules.
Service charges
A mandatory service charge is generally treated as the employer's revenue, not a tip, unless the law or policy says otherwise. Some states require them to be distributed to workers. Check local law.
If your tips were taken
- Keep records of tips and hours.
- Ask your employer in writing to correct it.
- File a complaint with the U.S. Department of Labor Wage and Hour Division or your state labor agency.
- Talk to an employment attorney.
- Do not be retaliated against for complaining.
Frequently asked questions
Can my employer deduct credit card fees from tips?
Often only the actual processing cost on the tip amount, depending on state law.
Do I report tips?
Yes, tips are taxable income.