{ "id": "R43445", "type": "CRS Report", "typeId": "REPORTS", "number": "R43445", "active": true, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 439232, "date": "2015-03-19", "retrieved": "2016-04-06T19:20:04.857263", "title": "The Tip Credit Provisions of the Fair Labor Standards Act (FLSA): In Brief", "summary": "The Fair Labor Standards Act (FLSA), enacted in 1938 (P.L. 75-718), is the federal legislation that establishes the general minimum wage that must be paid to all covered workers. In 1966, Congress amended the FLSA to add a \u201ctip credit\u201d provision to the minimum wage provisions. These amendments, which apply to \u201ctipped workers,\u201d do not change the guaranteed minimum wage of $7.25 per hour but they allow a combination of earnings from employer cash wages and employee tips to equal the federal minimum wage (currently $7.25 per hour). That is, the \u201ccredit\u201d is the amount from employee tips that an employer may count against his or her liability for the required payment of the full federal minimum wage. Under the current federal minimum wage and the current required minimum employer cash wage, the maximum tip credit is $5.12 per hour (i.e., $7.25 minus $2.13). Thus, all workers covered under the tip credit provision of the FLSA are guaranteed the federal minimum wage but tipped workers receive some of this income from employers and some from tips.\nFrom the introduction of the tip credit provisions in 1966 through 1996, the amounts for the minimum employer cash wage and tip credit were set as a percentage of the minimum wage, ranging from 40% to 60%. That is, during that 40-year period, employers of tipped employees could take a credit from tip earnings of between 40% and 60% of the federal minimum wage against their liability to provide the minimum wage to their employees.\nThe 1996 FLSA amendments changed the tip credit provisions to set the employer\u2019s statutory minimum cash wage obligation to a dollar amount ($2.13 per hour), rather than a percentage of the minimum wage. The maximum tip credit thereafter became the difference between $2.13 and the federal minimum wage. If the tip credit continues to be set by reference to a fixed dollar amount, rather than as a percentage of the minimum wage rate, the tip credit percentage of the guaranteed minimum wage will continue to increase and the employer cash wage percentage will continue to decrease if and when the federal minimum wage increases. With the minimum wage increase in 2007, the tip credit increased to its current level of 71%. Thus, under the current federal minimum wage of $7.25 per hour employers are required to pay a minimum cash wage of $2.13 per hour (29% of the federal minimum wage) and may take up to $5.12 per hour (71% of the federal minimum wage) as a credit against their liability to provide the full minimum wage of $7.25 per hour.\nIn the 113th Congress, legislation was introduced that would have amended the FLSA to alter the payment structure for tipped employees. Specifically, the most common proposed changes in the different bills would have increased the required employer contribution from the current level of $2.13 per hour to 70% of the prevailing federal minimum wage rate and would thus reduce the tip credit to 30% of the federal minimum wage.\nSeveral states have minimum wage rates that are different (mostly higher) than the federal minimum wage and different tip credit provisions. Of the 50 states and Washington DC, seven do not allow a tip credit, while the other 44 have a range of tip credit provisions, most of which require a minimum employer cash wage higher than the federal rate of $2.13 per hour. In cases in which states enact more protective minimum wage laws (i.e., higher minimum wage, lower tip credit), the employee is entitled to the provisions of state law.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43445", "sha1": "3c1ad872d33a72b69a864fabbd94756b86baf9f3", "filename": "files/20150319_R43445_3c1ad872d33a72b69a864fabbd94756b86baf9f3.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43445", "sha1": "58ee383e527e0eb68995d4109f14e3deaba8fea0", "filename": "files/20150319_R43445_58ee383e527e0eb68995d4109f14e3deaba8fea0.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 3375, "name": "Labor Standards and Labor Relations" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc284464/", "id": "R43445_2014Mar27", "date": "2014-03-27", "retrieved": "2014-05-06T21:21:54", "title": "The Tip Credit Provisions of the Fair Labor Standards Act (FLSA): In Brief", "summary": "This report discusses the Fair Labor Standards Act (FLSA), enacted in 1938 (P.L. 75-718), which is the federal legislation that establishes the general minimum wage that must be paid to all covered workers.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20140327_R43445_36e9c0255e6ad6736af2f0f02f0b3bc2055505d2.pdf" }, { "format": "HTML", "filename": "files/20140327_R43445_36e9c0255e6ad6736af2f0f02f0b3bc2055505d2.html" } ], "topics": [ { "source": "LIV", "id": "Labor", "name": "Labor" }, { "source": "LIV", "id": "Wages", "name": "Wages" }, { "source": "LIV", "id": "Tipping", "name": "Tipping" }, { "source": "LIV", "id": "Social life and customs", "name": "Social life and customs" } ] } ], "topics": [] }