FLSA Tip Compliance Guide for Restaurant Operators
A practical federal baseline for tip credits, tip pools, service charges, dual jobs, records, and audit checks. State and local rules may be stricter, so multi-location operators should validate each location before changing pay practices.
Tip Credit Eligibility
A federal tip credit is available only for employees who customarily and regularly receive more than $30 per month in tips, receive proper notice, and keep their tips except for a valid tip pool.
Tip Pool Design
If the employer takes a tip credit, mandatory pools must be limited to employees who customarily and regularly receive tips. If no tip credit is taken, broader non-manager pools may be allowed under federal law.
Manager Exclusions
Employers, managers, and supervisors may not keep employees' tips or receive tips from a pool. A manager may keep tips only when directly and solely serving a customer.
Service Charges
Compulsory charges are generally not tips under the FLSA. Amounts distributed to employees are treated as wages and must be handled in minimum wage and overtime calculations.
Card Fee Deductions
Federal guidance allows employers to reduce charged tips by the actual credit card fee percentage, but not below required minimum wage and overtime obligations. Some states are stricter.
Dual Jobs and Duties
Do not apply a tip credit to time worked in a separate non-tipped occupation. The federal 2021 dual-jobs rule was vacated on October 29, 2024, so this area deserves careful documentation and counsel review.
Federal baseline: minimum wage is $7.25 per hour, minimum direct cash wage with a valid tip credit is $2.13, and the maximum federal tip credit is $5.12. This guide is general compliance education, not legal advice. Check state and local rules before changing pay practices. Sources: DOL Fact Sheet #15 and DOL Tip Regulations.
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