Tipped Minimum Wage & Tip Credit Laws (50-State Breakdown)
An exhaustive statutory guide explaining how tip credits function under FLSA § 3(m), tip pooling restrictions, 80/20/30 rules, and full minimum wage state laws.
Employment Law Analysts
1. How the Federal Tip Credit Operates
Under FLSA § 3(m)(2)(A), employers may pay a cash wage below the statutory minimum wage (down to $2.13/hr federally) to employees who customarily receive more than $30/month in tips, provided the employer claims a tip credit (up to $5.12/hr) to satisfy the $7.25 federal minimum wage.
Mandatory Tip Make-Up Duty:
If an employee's direct cash wage plus actual tips earned fails to equal the statutory minimum wage for all hours worked during a workweek, the employer must pay the difference directly to the employee.
2. The 7 States Mandating Full Minimum Wage (No Tip Credit Permitted)
Seven US states explicitly prohibit tip credits by statute. In these jurisdictions, employers must pay tipped employees 100% of the state minimum wage before tips: