Service Charge v. Tip: A Big Deal for Service Industry Workers

When you’re the one paying for a service, it may not seem like there’s much of a difference between a service charge and a tip. However, for a waiter, bartender, valet person or other service worker, there are significant implications in terms of taxes and labor regulations, and potentials for abuse by employers.

According to the Wages and Hours Division of the United States Department of Labor, an employer can count tips toward certain wage requirements, usually the minimum wage. For example, an employer can pay an employee less than the minimum wage if their tips cover the difference.

However, an employer can only do this if the “tip” meets certain legal requirements. First, the employee’s “base” wage must be at least $2.13 an hour. Additionally, tips must usually go directly to the employee. In some situations, tipping pools can be allowed. However, the tip and their base wage must add up to the minimum wage. Lastly, tips must be voluntary for the tipper.

This can create problems. For example, if an employee’s tips and their base pay do not add up to the minimum wage, employers must make up the difference. If there is a tip pool, the same rules apply. And if employees switch between tipped and no-tipped jobs, they have to be paid minimum wage for the non-tipped hours.

These guidelines are set forth in the Fair Labor Standards Act (FLSA). This law is administered by a special division of the U.S. Department of Labor. The law regulates several aspects of employee pay, including minimum wage, tips, overtime, and record keeping. It also covers child labor laws. The FLSA was first passed in 1938. Over the years, subsequent acts, court cases, and regulations have refined and updated the law, including raises to the minimum wage.

Laws like the FLSA exist to make certain that employees are fairly compensated for their time. However, in some cases, employers may try to cut corners and bend the rules in order to improve their overhead. In cases like these, employees may seek legal action against their employers for back-owed money, or report them to the Wages and Hours Division of the U.S. Department of Labor.

Lawsuits have been filed against employers, alleging that they failed to pay employees an honest wage, in violation of labor laws. These suits seek both redress, and act as a deterrent against future abuses.

If you feel that an employer has used “service charges” or other technicalities to keep you from getting a fair wages, you may be entitled to compensation. You can start to explore your options by visiting the Service Charge, Wage & Hour Class Action Lawsuit Investigation. Here, you can enter information about your situation for a legal review by a trained expert with a background in this type of litigation. The initial consultation is completely free of charge, and from it, you can receive additional guidance on the best legal steps to take in your exact situation.