Wage and Hour Division (WHD)
( February 29, 2012) (PDF)
Fact Sheet #15A: Ownership of Tips Under the Fair Labor Standards Act (FLSA)
This fact sheet addresses ownership of tips by the employee under the FLSA.
Tip Credit: Section 3(m) of the
FLSA permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage (currently $7.25). Employers must provide oral or written notice to tipped employees of the use of the tip credit in advance.
2011 Final Rule: The Department’s tip credit regulations were updated effective May 5, 2011 to codify the Wage and Hour Division’s (WHD) longstanding position that:
Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.
Under the regulation, an employer that satisfies the requirements to take a tip credit may use an employee’s tips only:
- as a partial credit against its minimum wage obligation to the tipped employee, and/or
- in furtherance of a valid tip pool.
Even if the employer does not take a tip credit, tips remain the property of the employee that received them and the employee cannot be required to turn over his or her tips to the employer. Similarly, the employer may not take the employee’s tips to further an invalid tip pool, such as one that includes employees who do not customarily and regularly receive tips, like cooks, janitors, or dishwashers.
Enforcement: Please note that WHD will not enforce this policy on ownership of tips under the FLSA between May 5, 2011, and February 29, 2012, for employers in the Ninth Circuit who did not take a tip credit.? * For more information, please see Field Assistance Bulletin No. 2012-2. Note that this enforcement position does not limit the rights of any employee in the Ninth Circuit to bring a private action under FLSA § 16(b) to assert his or her rights under the 2011 Final Rule that became effective May 5, 2011.
Where to Obtain Additional Information
For additional information, visit our Wage and Hour Division Website: http://www.wagehour.dol.gov and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243).
This publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations.
*. The Ninth Circuit has appellate jurisdiction over the states of California, Nevada, Washington, Oregon, Alaska, Idaho, Montana, Hawaii, and Arizona.