Wait . . . You Don’t Make Minimum Wage?

by Amy Pimer

The Fair Labor Standards Act (FLSA) allows employers to include potential tips earned in calculating what they need to pay their employees in order to comply the federal minimum wage requirements.[1] This is done through the process of using a tip credit, which is allows employers to provide a cash wage that is less than the federal minimum wage under § 3(m) of FLSA.[2] A tipped employee is anyone who makes more than $30 per month in tips.[3] The federal minimum wage is $7.25 an hour and the maximum tip credit available to employers is $5.12.[4] This results in an hourly rate for tipped employees of $2.13.[5] Although, if an employee works in a state that has a minimum wage higher than the federal standard, they are entitled to the higher wage.[6] But does this type of a procedure make it possible for someone to earn a living?

Currently, “[n]ineteen states use the federal $2.13 tip wage, while [twenty-four] states have set a subminimum tip wage above that. Seven other states, most of them in the West, require waiters’ base pay to be at least the state minimum wage.”[7] While there are a few states paying their tipped employees the full minimum wage, this leaves most of these employees reliant on tips to make up the difference in pay. While at first it may not seem difficult to make up for the approximate $5 per hour difference, a server’s ability to do so is based on several factors beyond his or her control. These include but are not limited to: the size of the bill, the size of a server’s station, the seasons, and the mood of customers.[8] In addition to these factors, tipped employees are often required to tip out non-tipped employees such as hostesses, bartenders, and busboys.[9] Further, tipped employees often cannot rely on steady work hours. Employers often call employees in at the last minute to deal with popular dining or drinking times, and send people home when it is slow to save on expenses.[10] Additionally, some restaurants require wait staff to pay for tables that walk out on their bills, further decreasing the amount of tipped income they take home at the end of the day.[11]

With all the above factors stacked against tipped employees, are they really making that money back on a steady basis? A bill recently went before the legislature to raise the minimum wage, which included increasing wages for tipped employees.[12] The new proposed laws “called for the tipped wage to rise gradually so that by 2020 it would equal 70% of the proposed new minimum of $10.10 an hour.”[13] This would have increased the minimum wage for tipped employees for the first time since 1991.[14] However, every House Republican and six House Democrats voted against the bill, leaving the rate unchanged.[15] After the vote, President Obama issued an executive order raising the minimum wage “for contract workers performing services and those in construction.”[16] White House spokesman Bobby Whithorne stated, “Higher wages will attract higher-quality workers who are more productive, reduce turnover, which can significantly offset the cost of providing higher wages.”[17] The executive order issued by President Obama will also require employers to “ensure that tipped workers earn at least $10.10 an hour…[and] that amount increases by 95 cents per year until it reaches 70% of the regular minimum wage.”[18] This order will take affect on January 1, 2015.[19]

This change to the minimum wage laws will help lift the burden that waiters feel, by ensuring that they actually get paid at least minimum wage. Lawmakers and legislators need to continue stay on top of updating wage standards, to prevent another twenty years from going by while tipped employees lose out on earned wages.

[1] See Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (FLSA), U.S. Department Lab. Wage & Hour Division 1, http://www.dol.gov/whd/regs/compliance/whdfs15.pdf (last updated July 2013).

[2] Id.

[3] See Wage and Hour Division: Minimum Wages for Tipped Employees, U.S. Department Lab. (Sept. 1, 2014),


[4] See Wage and Hour Division, supra note 3.

[5] See id.

[6] See Wages: Minimum Wage, U.S. Department Lab., http://www.dol.gov/dol/topic/wages/minimumwage.htm (last visited Oct. 22, 2014).

[7] See Steven Greenhouse, Proposal to Raise Tip Wages Resisted, N.Y. Times (Jan. 26, 2014),


[8] See Jeanna Smialek, Waitresses Stuck at $2.13 Hourly Minimum for 22 Years, Bloomberg (Apr. 25, 2013, 12:01 AM), http://www.bloomberg.com/news/2013-04-25/waitresses-stuck-at-2-13-hourly-minimum-for-22-years.html.

[9] See Fact Sheet #15, supra note 1.

[10] See Anna Haley-Lock, Waiting Tables for a Living: How Employers and Geography Affect Working Conditions, 30 Focus 30, 30 (2013), available at http://www.irp.wisc.edu/publications/focus/pdfs/foc301.pdf.

[11] See Luke O’Neil, Victimized Twice, Slate, http://www.slate.com/articles/life/food/2013/12/suzanne_parratt_servers_being_forced_to_pay_for_walkouts_is_surprisingly.html (last updated Dec. 9, 2013).

[12] See Will Wrigley, House Republicans Unanimously Vote Down Minimum Wage Increase, The Huffington Post, http://www.huffingtonpost.com/2013/03/15/gop-minimum-wage-increase_n_2884912.html (last updated Mar. 15, 2013, 6:41 PM).

[13] See Wrigley, supra note 12.

[14] See Id.

[15] See Id.

[16] See Roger Runningen & Kathleen Miller, Obama to Raise Minimum Wage for Contractors to $10.00, Bloomberg (Jan. 28, 2014, 3:50 PM), http://www.bloomberg.com/news/2014-01-28/obama-to-raise-minimum-wage-for-contractors-to-10-10.html.

[17] See Roger Runningen, supra note 16.

[18] See Laura Clawson, Obama to Sign Order Raising Minimum Wage for Federal Contract Workers, Daily Kos (Feb. 12, 2014, 5:15 AM), http://www.dailykos.com/story/2014/02/12/1276967/-Obama-to-sign-order-raising-minimum-wage-for-federal-contract-workers#.

[19] See Clawson, supra note 18.

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