FLSA Update: Bill Clarifies Who Counts as a 'Tipped Employee' and How Their Pay is Calculated

This legislation tweaks the Fair Labor Standards Act (FLSA) to refine the definition of a 'tipped employee.' The core change specifies that to be considered 'tipped,' an employee's cash wages combined with their tips must meet or exceed the standard federal minimum wage. Crucially, they also need to consistently earn more than $30 per month in tips.

Who Counts as Tipped Now?

Under this act, the label 'tipped employee' isn't just about receiving any tips; it's about whether those tips, added to the employer-paid cash wage (which can be lower than the standard minimum), actually bring the employee up to the full minimum wage standard. Think of a restaurant server – their hourly cash wage might be below the standard minimum, but if their tips consistently push their total earnings over that threshold and they reliably make over $30 in tips each month, they fit this definition. The amendment aims to provide a clearer benchmark for both employees and employers.

Getting the Paycheck Math Right

The bill also adds clarity on when this wage calculation happens. Employers can assess if an employee meets the tipped threshold based on different periods: daily, weekly, bi-weekly, per pay period, or monthly. This provides employers with defined options for compliance checks, ensuring they are correctly classifying employees and meeting wage requirements under the FLSA based on a chosen, consistent timeframe. For instance, a salon owner could choose to verify weekly if their stylists' combined commission/wages and tips meet the minimum wage standard for that week.