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What are the tipped employee laws under the Fair Labor Standards Act?

The National Restaurant Association (NRA) published a memo on May 4, 2011 which summarizes new tipped employee laws under the Fair Labor Standards Act. If you employ tipped employees, these laws will impact your business so it’s best that you stay updated on these developments as they become available. 

Here are some of the key points of that memo:

New U.S. Department of Labor amended regulations, issued April 5, 2011, and effective May 5, 2011, address a number of areas under the federal Fair Labor Standards Act (FLSA) that particularly impact tip credit requirements for employers.


The new amended regulations, 29 CFR sections 531.54 and 531.59(b), now specifically require employers to “inform” employees, in advance of taking the tip credit, of certain information, which includes:

  • The amount of the cash wage to be paid by the employer to the tipped employee;

  • The amount of tips to be credited as wages toward the minimum wage (a federal maximum tip credit of $5.12 per hour, but lower in some states, not to exceed the value of tips actually received);

  • That all tips received by the employee must be retained by the employee except for tips contributed to a valid tip pool limited to employees who customarily and regularly receive tips;

  • That the tip credit shall not apply to any employee who has not been informed by the employer of the provisions for a tip credit; and

  • For employers that require tip pools, any required tip pool contribution amount or percentage, including notice that the tip credit may be taken only as to the amount the server actually receives, and that the employer may not retain any of the server’s tips for any other purpose.


If you’re an owner of such an establishment, we recommend that you inform your workers of these tipped employee laws by printing and having them sign the National Restaurant Association Tip Notices form.

Have any additional questions or still unclear on the tipped employee laws? Contact us online.

This information is based on facts, assumptions and representations as stated and authorities that are subject to change.  We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER:  The information within this web site is for informational and educational purposes only and is not tax advice and should not be used as such.  The facts of each individual situation can have significantly different outcomes when applying tax law.  The hiring of a CPA is an important decision not to be based solely on advertisements.

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