As a legal expert with a focus on labor laws, I am well-versed in the intricacies of wage and hour regulations. It is a common misconception that all workers must be paid at least the federal minimum wage. However, there are exceptions to this rule, particularly for workers who receive tips as part of their compensation.

Under the Fair Labor Standards Act (FLSA), the federal law that governs minimum wage and overtime pay, employers are allowed to pay tipped employees a lower cash wage, provided that the total of this wage and the tips received by the employee equals at least the federal minimum wage. This is known as the "tip credit" provision. As of my last update, the federal minimum wage is $7.25 per hour, but many states have higher minimum wage rates.

For tipped employees, the employer can pay a direct (base) cash wage of $2.13 per hour, as long as the employee's tips make up the difference to reach the federal minimum wage. If the employee's tips combined with the direct wage do not equal the minimum wage, the employer is required to make up the difference. It is important to note that not all tipped employees are eligible for this lower wage. The FLSA has specific criteria that must be met for an employee to be considered a tipped employee.

Employers are also required to inform tipped employees about the tip credit provision and to keep accurate records of tips received. Furthermore, employers cannot take a tip credit for any tips that are not reported by the employee. Additionally, if an employee spends more than 20% of their time performing non-tipped work, the employer must pay at least the full minimum wage for those hours.

It is crucial to understand that the tip credit is not a license for employers to underpay their employees. The FLSA has strict guidelines to ensure that employees are not exploited. If an employer fails to comply with these regulations, they may face penalties, including back pay, fines, and even criminal charges in severe cases.

It is also worth noting that the use of tip pools is a common practice, where tips are pooled and then distributed among employees. However, the FLSA has specific rules regarding tip pools. For example, tip pools can only include employees who customarily and regularly receive tips, and the employer cannot take a tip credit for the tips distributed through the tip pool.

In conclusion, while it is not illegal for tipped employees to work for less than the minimum wage, there are strict regulations in place to protect these workers and ensure they are not underpaid. Employers must adhere to these regulations, and employees should be aware of their rights to ensure they are receiving fair compensation for their work.

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Workers who receive tips. Under federal law, if part of your compensation comes from tips, then your employer can pay you significantly less than the minimum wage, as long as your hourly wage plus the average amount that you earn from tips equals the minimum wage.read more >>