What Qualifies As A Tipped Employee In The Restaurant Industry?

Tipping culture varies by country — in some places, it might even be seen as unusual. But in the United States, it isn't just a formality or basic courtesy, as it can determine how an employee is classified and paid. Across the country, servers, bartenders, bussers, and certain counter workers can be classified as "tipped employees," but this designation has distinct legal significance. The system is also rooted in the dark history behind tipping in restaurants, where gratuities became a firmly established part of the American hospitality industry and broader culture.

The federal Fair Labor Standards Act (FLSA) defines a tipped employee as an individual who "customarily and regularly" receives more than $30 per month in tips in their line of work. This specific definition is what matters for employers because it determines whether an employee is eligible for a "tip credit," whereby a portion of their tips counts toward the federal minimum wage of $7.25 per hour that they are owed. For a tipped worker, the direct cash wage can be as low as $2.13 per hour. In practice, however, things can be much messier, especially because certain state and local laws set higher minimum wages or even ban tip credits outright.

Importantly, the $2.13 federal cash wage doesn't mean a tipped employee can legally take home only $2.13 per hour. If their tips and direct wages do not add up to at least $7.25 per hour, then it is up to their employer to make up the difference. Additionally, before claiming a tip credit, an employer is required to explain the tip credit provisions to the employee, and employees generally have the right to keep their tips.

There are also rules restricting where tips can go. For instance, employees may be required to contribute to a tip pool, through which the money can be distributed among other staff members at a given establishment. That said, when an employer claims a tip credit, the mandatory tip pool cannot include workers who don't typically receive tips, such as dishwashers or cooks. Employers and supervisors, under federal law, cannot keep their employees' tips under any circumstances. This distinction also has a bearing on when you should give fast food workers a tip, since not every person behind the counter is a tipped employee.

Things can get a little complicated at the state level, as some states permit the $2.13 federal cash wage, while others mandate a higher wage. Others, including Washington, Nevada, Oregon, and California, don't even allow employers to claim a tip credit in the first place. Mandatory service charges can further cause confusion because they aren't the same as voluntary tips, making the must-know etiquette for tipping on top of a restaurant's service fee particularly important. All in all, being classified as a "tipped employee" doesn't necessarily say much about someone's pay, as that ultimately depends on their employer and, even more importantly, where they are located.