Tipped Employees are Not Cheap General Labor

I am writing case updates for the upcoming American Bar Association (ABA) Fair Labor Standard Act (FLSA) Midwinter Report.  The annual FLSA Midwinter Report will be presented at the February 2020 Midwinter Meeting of the Federal Labor Standards Legislation Committee, and I will be listed as a contributor in the printed version.

In the first case that I am reviewing, the court expanded on some legal background worthy of a blog. 


Historically, we thought of tipped employees as waitresses.  However, the world of tipped employees has expanded.  As consumers, we tip a large number of service persons including quick-service restaurant works, uber or cab drivers, bellhops, hair and nail stylist.  The list goes on. 

What qualifies as a tipped employee and what does the Fair Labor Standard Act (FLSA) require for classification of a tipped employee. Here is what the court[i] said in response to these questions. 

Who qualifies as an FLSA tipped employee?


“any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”

29 U.S.C. § 203(t); accord Iowa Admin. Code r. 875-217.50(2).

What are the criteria for a tipped employee?

 Employers may pay tipped employees a lower base per hour rate instead of the federally mandated minimum per hour wage rate, so long as tips make up the difference lower base per hour rate and minimum wage.

Except, however, if the employee performs untipped duties related to the employee’s tipped occupation take up a substantial amount of his or her work time—more than 20%— or duties unrelated to the employee’s tipped occupation, than the employee is entitled to be paid minimum wage for that non-tipped labor.[i] 

There is another call-out.  The classification of the tipped employees described above is based on the Federal Fair Labor Standard Act.  States may and do have statutes and regulations regarding minimum wage, tipped employees rates and qualifications.


[i]  The DOL’s Field Operations Handbook

[i] HOWE v. JOHNNY’S ITALIAN STEAKHOUSE, L.L.C., 2018 WL 6521496 United States District Court, S.D. Iowa, Central Division, Case No. 4:16-CV-00086-SMR-HCA.  September 11, 2018.