How Much Should I be Paid in Overtime as a Tipped Employee?

Nov 10, 2020

Federal labor laws and Ohio laws for tipped employees can often be difficult to navigate and understand. If you are a tipped employee, you may be wondering, “do tipped employees get paid overtime?” or “how do I calculate the overtime wage for tipped employees?” While every case is different and merits its own review, we hope this article provides general guidance.

Do tipped employees get overtime?

Under the Fair Labor Standards Act (“FLSA”), employees are eligible to receive overtime if they are considered “non-exempt.” Determining whether an employee is non-exempt deserves its own article as making that determination is difficult and fact intensive. However, for purposes of this article, under federal and Ohio labor laws, tipped employees usually are eligible to receive overtime pay. If you have questions about whether you are a non-exempt employee, we would encourage to you to call a Columbus wage and hour attorney.

How do I calculate minimum wage pay for tipped employees?

The FLSA also requires that employees be paid at least $7.25 per hour. This is true regardless as to whether the employee receives tips or not. However, for employers who have tipped employees, the FLSA permits the employer to take a “tip-credit”, which lessens the employer’s obligations to pay $7.25 per hour to those employees. This is why tipped employees are often paid at a lesser rate. Although employers may get credit for its employees receiving tips, the employer may not pay less than $2.13 per hour to the tipped employee as a direct wage. If the employer pays less or does not pay a direct wage at all, it is a violation of the FLSA.

The reason employers may pay less is the thought that the employee’s tips, along with the direct way the employer pays, will allow that employee to earn at least minimum wage. However, if the employee receives less than minimum wage after combining how much the employer pays plus the tips, the employer must pay the difference to ensure that the employee makes minimum wage.

How do I calculate my overtime wage as a tipped employee?

In addition to the minimum wage, the FLSA also requires employers to pay its eligible employees overtime wages for all hours worked beyond forty hours per work week. In general, the overtime rate an employer must pay is one and one-half times the employee’s “regular rate of pay.” However, for purposes of determining “regular rate of pay” for tipped employees, employers often mistakenly use the employee’s direct wage that the employer pays before the employee receives tips—such as the $2.13 it pays its employees per hour. It then mistakenly pays its tipped employees an overtime rate of $3.20/hour, which is one and one-half times $2.13 per hour. However, this is incorrect and unlawful under the FLSA. Rather, the FLSA requires that employers use the federal minimum wage ($7.25/hour) as the tipped employee’s regular rate of pay. The employer may then factor in its tip credit to determine what the overtime wage should be.

The following are steps for how to calculate overtime pay for tipped employees:

1. Multiply federal minimum wage by one and one-half.
2. Determine the employer’s tip credit by subtracting the amount the employer is paying as a direct cash wage from the federal minimum wage of $7.25.
3. Subtract the tip credit from step two from the overtime rate from step one to determine the employee’s overtime wage rate.

For illustration purposes, the below example is how to figure out overtime wages for a tipped employee receiving $2.13 per hour as a direct cash wage from her employer during regular hours.

1. $7.25 (regular rate of pay) x 1.5 (one and one-half overtime rate) = $10.88
2. $7.25 – $2.13 = $5.12 is the tip credit
3. $10.88 – $5.12 = $5.76, which is the correct overtime wage that this tipped employee should be paid from its employer.

What are my remedies if I am owed unpaid overtime pay?

If you are owed unpaid overtime wages because your employer has not paid you the correct overtime wage as a tipped employee, you can file a private lawsuit. Other employees, who have suffered the same violations from the employer, may also join together and bring one lawsuit against the employer, which is known as a collective action.

If an employee successfully proves that his or her employer violated the FLSA by failing to pay the correct overtime wages, the employer may be responsible for paying the employee the following:

• Back wages – The amount of money that should have been paid;
• Liquidated damages – An additional amount equal to back wages;
• Attorneys’ Fees; and
• Costs of pursuing the lawsuit.

Contact Brian G. Miller Co., L.P.A. to discuss your questions about Ohio laws for tipped employees

At Brian G. Miller Co., L.P.A., our Columbus wage and hour attorneys represent individual employees and groups of employees who have not been paid the correct overtime wages.

If your employer has failed to pay your overtime correctly, or if you have general questions about whether your employer has violated federal and Ohio overtime laws for tipped employees, please call (614) 221-4035 or click here to schedule a free consultation with a trusted and respected wage and hour attorney at Brian G. Miller Co., L.P.A.