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FAQ About Tipped Wage

Author: Miranda Bond Date: April 01, 2014

Many employers and employees have questions about how wage and hour rules apply to tipped employees. The information provided by the New Jersey Restaurant Association below should help. To see their original article on tipped wage, visit their website here.

As a preliminary matter, you should know the minimum rates of pay that are currently required. NJRA rounded some numbers from fractions of pennies to make the math easier:

  • The actual minimum cash payment that employers must pay to tipped employees under federal law is $2.125 per hour (rounded to $2.13).
  • The overtime premium above the minimum wage of $8.25 is $4.125 per hour (rounded to $4.13).
  • The actual minimum overtime pay rate is $12.375 (rounded here to $12.38). Tips that are credited against the minimum wage are also credited against the overtime pay rate.

What is the minimum wage for tipped employees?

Tipped employees in the State of New Jersey must make the same minimum wage as everyone else: $8.25 for every hour worked in a work week up to 40 hours. Federal law requires that employers pay no less than $2.13 for all such hours. If your tips (over the required $2.13) do not amount to at least $8.25 per hour, your employer must make up the difference in your paycheck. This is a requirement and not optional. Tipped employees are not second-class citizens, and the law entitles you to the same minimum wage as everyone else.

What if I make more than the minimum wage in tips alone?

Regardless of how much you make in tips, your employer is required to pay $2.13 per hour. Even if you make much more than $8.25 per hour, your employer must pay you an additional $2.13 per hour. For example, if you work a six-hour day and receive $90 in tips (including cash that you take home), that would mean that you actually made $15 per hour in tips. Even so, your employer must pay you an additional $2.13 per hour in a paycheck, bringing your real gross hourly wage up to $17.13 per hour.

The government takes seven deductions from every employee in America: State and Federal Income Taxes, as well as deductions for Family Leave, Social Security, Unemployment, Disability and Medicare. As tipped employees can take home most of their cash tips, these deductions can actually exceed the $2.13 per hour additional that your employer pays you by check. In such cases, the entire $2.13 per hour would go to the government to satisfy these deductions. The check will be zero because the funds were transferred from your employer to the government. Tipped employees’ income is subject to the same withholding as non-tipped employees.

What if I make less than minimum wage even after tips?

You’re entitled to the same minimum wage as everyone else. Your employer must make up the difference. For example, if you work a six-hour day and make only $30 in tips (including any cash that you took home from work), your employer must pay you a wage amount that equals the minimum wage. But in this case, since your tips only equaled $5 per hour, your employer must increase its wage contribution from $2.13 to $3.25 per hour to make sure that you make the same $8.25 minimum wage as everyone else.

As a tipped employee, am I entitled to a premium payment for overtime?

Yes. Whenever you work more than 40 hours in an established work week, all hours worked in excess of 40 must be compensated at the overtime pay rate like any other non-tipped employee. Overtime must be paid at 1.5 times the regular rate for all hours worked in excess of 40. The minimum overtime rate must not be less than $12.38.

Overtime When Tips Don’t Meet the $12.38 per Hour Overtime Rate

For example, consider that you have already worked 40 hours within a work week. Then you work an additional six-hour day, during which you make $30 in tips (including any cash you take home after that shift). This $30 is effectively $5 per hour. That’s below the minimum overtime wage of $12.38. We know your employer must pay you at least $2.13 per hour for all hours worked, and make up any shortfall under minimum wage. Your employer must make sure that you make at least $12.38 per hour in overtime.

In this case, the $2.13 + $5 per hour (being only $7.13) would not satisfy the current overtime minimum wage of $12.38. In this case, your employer would be required to increase its contribution from $2.13 to $7.38 per hour to make sure that you make the same overtime minimum wage as everyone else: $5 per hour (tips) + $7.38 per hour = $12.38.

Overtime When Tips Do Meet the $12.38 per Hour Overtime Rate

Once you’re in overtime (starting the first minute after 40 hours in given work week), your employer is required to pay more than the $2.13 per hour that is required for non-overtime work, even if you already made more than $12.38 in tips. When you’re in overtime, your employer’s minimum contribution goes up from $2.13 to $6.25 per hour.

For example, if you worked an additional six hours of overtime and made $90 in tips ($15 per hour in tips including any cash that you took home), your employer must pay you an additional $6.25 per hour in your paycheck (the minimum base rate cash wage of $2.125 + the minimum overtime cash wage of $4.125), bringing your real gross hourly wage up to $21.25 per hour.

What do I do if my employer is not following these rules and under-paying me?

You’re entitled to the same remedies as everyone else. Of course, in fairness to everybody, it’s always the best policy to talk to your employer first. Perhaps this was a mistake, you read your pay stub wrong, or they misunderstood the law. If they do, they can refer to this website or call the NJRA for guidelines. But if you’re unable to resolve the problem to your satisfaction, here’s how to report wage and hour violations to either the Federal or State Labor Departments (Wage & Hour):

Federal: The U.S. Department of Labor’s Wage and Hour Division (WHD) is responsible for administering and enforcing some of the nation’s most important worker protection laws. WHD is committed to ensuring that workers in this country are paid properly for all the hours they work, regardless of immigration status.

If you have questions or concerns, you can contact us at 1-866-487-9243 or visit www.wagehour.dol.gov. You will be directed to the nearest WHD office for assistance. There are over 200 WHD offices throughout the country with trained professionals to help you. The following information is useful in filing a complaint with WHD:

  • Your name
  • Your address and phone number (how you can be contacted)
  • The name of the company where you work(ed)
  • Location of the company (this may be different from where you worked)
  • Phone number of the company
  • Manager or owners name (who should we ask to speak to?)
  • Type of work you did
  • How and when you were paid (i.e. cash or check, every Friday)

Any additional information that you can provide, such as copies of pay stubs, personal records of hours worked, or other information on your employer,s pay practices, are helpful.

New Jersey: If your employer owes you wages, you can file a complaint with New Jersey’s Department of Labor (NJ DOL) under the Wage Payment Law or the Wage and Hour Law. This can be done by filling out Wage Complaint Form MW-31A (the form can be found at lwd.dol.state.nj.us/labor/forms_pdfs/lsse/mw-31a.pdf. NJ DOL will then issue a summons to your employer, who will have to appear at a hearing within five to fifteen days. If the amount claimed is less than $10,000, or you are willing to accept a maximum award of $10,000 and forfeit anything above that amount, NJ DOL can issue a decision and an award.


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