Tipped Workers' Rights: Know Your Wage Rights
Tipping employees has become more common at businesses in Arizona and around the country. However, these workers often face unique challenges related to their wages and working conditions.
Understanding and advocating for tipped workers' rights is crucial for ensuring fair compensation and creating a more equitable work environment.
This article discusses wage and hour laws impacting tipped employees, including what the minimum wage is for tipped employees, whether tip pooling is lawful, and how an employer must handle an employee’s tips.
TABLE OF CONTENTS
What is a tipped employee?
Tipped work refers to any job where employees regularly receive tips from customers as part of their income. These tips can constitute a significant portion of their earnings, often surpassing their base pay.
Individuals who receive tips often include a wide range of occupations, from servers and bartenders to hairdressers and drivers. These workers often rely heavily on tips to supplement their base wages, making the regulation of these earnings critical to their financial stability.
Common tipped occupations include:
Servers in restaurants
Bartenders in bars and clubs
Hotel staff such as bellhops and concierge
Hairstylists and barbers
Valet parking attendants
Drivers
Something important to understand is that there are several misconceptions about tipped work. One major misconception is that tips always result in higher earnings than standard wages; while this can be true in some cases, it is not guaranteed. Factors such as slow business days, economic downturns, and even improper tipping practices can lead to inconsistent and often inadequate earnings for tipped workers.
What is the minimum wage for a tipped employee?
In Arizona, employees must earn at least $14.35 per hour in 2024. The minimum wage in Arizona increases on January 1 each year based on the cost of living, so it is important to stay updated each year about what the minimum wage is.
The minimum wage in Arizona for tipped employees can be $3.00 less than the minimum wage, so long as their employer has established a proper tip credit and the employees’ tips cause their wages to be at least the minimum wage of $14.35 per hour in 2024.
This means that an employer in Arizona can pay tipped employees an hourly wage not less than $11.35 per hour in 2024, but the employees’ tips must make up the difference so their total hourly compensation is still at least $14.35 per hour.
There are strict notice requirements that an employer in Arizona must follow to lawfully take a tip credit. Tipped employees must receive notice that the employer will be utilizing the tip credit to satisfy the minimum wage requirements under Arizona law. Without such notice, the employer would have to pay the tipped employee the full minimum wage of $14.35 per hour regardless of the amount of tips earned by the employee.
Is tip pooling legal?
Tipped workers can be required to participate in a tip pool. However, employees who do not customarily and regularly receive tips – such as managers or other back-of-house staff – cannot be included in a tip pool.
If a tip pool is found to include employees who do not customarily and regularly receive tips, the tips cannot be used to take a tip credit for purposes of paying tipped employees the minimum wage.
If employees who do not customarily receive tips are included in the tip pool, the employer must pay the employees the full minimum wage of $14.35 per hour and likely owes the employee the balance of the tips that were taken from them as part of the tip pool.
Overtime Pay for Tipped Workers
Tipped workers in Arizona are entitled to overtime pay when they work more than 40 hours in a week.
Overtime must be compensated at 1.5 times the regular rate of pay. For tipped workers, this includes their direct wage plus the amount of the tip credit taken when there is a valid tip credit.
Some common violations to be mindful of include:
Employers failing to include the tip credit amount in the calculation of overtime pay.
Misclassifying employees to avoid paying overtime.
Not paying for all hours worked, including setup and cleanup time.
Not notifying employees of a tip credit.
Including employees in a tip pool who do not customarily receive tips.
Deductions from Wages
An employer must always pay an employee the minimum wage they are due, including when they take a tip credit, so some deductions from wages are illegal because they impact the minimum wage the employee must receive. When taking a tip credit, employers cannot deduct the following from a tipped worker's wages:
Money for customer walkouts
Money for breaking dishes or glasses or other employer equipment
Money for cash register shortages
If illegal deductions are made, you should speak with a lawyer about your wage rights and how the deductions impact your wages.
Understanding and protecting the rights of tipped workers in Arizona is essential for ensuring fair treatment and compliance with the law.
By staying informed and proactive, tipped workers can secure their rights and achieve greater financial stability and job satisfaction.
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