The law regarding tips can be complicated, and employers sometimes violate tip laws unintentionally, while other employers violate the law on purpose in order to save money. If you believe tips have been improperly retained by your employer or credited to your wages, contact our Illinois tip law attorneys today.
Many workers, particularly in the restaurant, bar and hospitality industries regularly receive tips from customers. A tipped employee is defined as one who regularly receives more than $30 per month in tips. The tips you receive from a satisfied customer are your sole property and not the property of your employer. Tips are subject to protections under both federal and Illinois state law. Tips are paid, calculated and administered in a number of different ways, resulting in a variety of specific laws governing tips.
Tips can have a significant impact on an employer’s obligation to pay minimum wage. If you are a tipped employee, your employer is required to pay you minimum wage, but is entitled to a credit for your tips up to 40% of your wages. As of July 1, 2010, minimum wage in Illinois is $8.25 per hour. This means that, for a tipped employee, your minimum wage can be as low as $4.95 per hour ($8.25 minus 40% tip credit). During the first 90 days of employment, a tipped employee can be paid as little as $4.65 per hour. If an employer pays less than these amounts, the employer is violating the Illinois Minimum Wage Law.
Many restaurants include service charges with the bill, particularly for larger parties, often equal to 15% of the bill. A service charge is not a tip. Service charges are not subject to tax if they are turned over to the employees who would have otherwise earned that amount as a tip, but if used by the employer for other purposes constitute part of the employer’s gross receipts subject to tax. Service charges cannot be used in calculating a tip credit.
No tip credit applies to pooled tips. An employer may require employees to pool or share their tips. Under the federal Fair Labor Standards Act (FLSA), tips may only be pooled among employees who customarily receive tips, such as waiters, servers, busboys/girls, bartenders and the like. Employees who do not customarily receive tips, such as cooks, dishwashers, and janitors, may not participate in tip pooling arrangements.
Where tips are paid by credit card, they are still the property of the employee. These tips must be distributed by the employer to the tipped employee no later than the next payday, even if the employer is having difficulty recovering all tips through the credit card company. The employer is entitled to deduct the processing fee – typically between 1-3% – charged by the credit card company before paying out the tip to the employee.
Additional issues can pertain to employees who perform both tipped and non-tipped duties, where minors work tipped jobs, and to breaks and meals. In dealing with tip questions, it is important to consult with experienced Illinois tip law attorneys. At the Chicago Overtime Law Center, we have experience handling a wide variety of tip issues, and will provide you with skilled advice and representation. If you are faced with questionable employer tip practices, contact our offices at (312) 869-4095 today.