Although the federal Fair Labor Standards Act (FLSA) requires employers to pay all their workers no less than the standard, federal minimum wage (currently set at $7.25 per hour) the FLSA does provide exceptions to that rule. One of those exceptions covers employees who receive tips by working directly with customers. This category most commonly includes servers and bartenders, but it can also include barbers, drivers and delivery personnel, depending on their employment situation.
Because tipped employees are expected to receive most of their compensation directly from the customers they work with, the legal minimum wage for tipped employees is just a fraction of the standard minimum wage, although the FLSA does require employers to make up the difference if the combination of wages and tips earned by tipped employees is less than the standard minimum wage.
In order to prevent employers from taking advantage of the lower minimum wage for tipped employees, the U.S. Department of Labor (DOL) requires employers to make sure their tipped workers are spending no more than 20% of their time on un-tipped labor (cleaning, restocking supplies, etc.) If an employee does spend more than 20% of their work hours performing work in which they are not in direct contact with customers, then the FLSA requires their pay to be raised to the standard minimum wage. Continue reading