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What to Know About Working for Tips in North Carolina

man handing another person a paycheck, the hand is outstretched and the photo is from a second person perspective

Low wages and unstable paychecks are common for restaurant employees, hotel employees, servers, and others in the service industry. These employees are generally working for tips in North Carolina, allowing the employer to pay a lower hourly rate. Under North Carolina and Federal wage and hour law, tips received by employees belong to the employee, not the employer. If you are owed overtime or minimum wages or have filed a complaint with the Department of Labor about your wages or paychecks contact wage attorney Karl S. Gwaltney at (919) 526-0450.

What counts as a tip for purposes of minimum wage and overtime pay can be tricky. For example, some restaurants charge mandatory service charges on bills with large parties. In North Carolina this amount is not considered a tip but is instead a service charge. Most employers give this money to the waiter or server as a tip, but they are not obligated to consider this amount as a tip. For money given by a customer to be considered a tip for minimum wage purposes, certain requirements must be met. The tip payment must be voluntary, the customer must have the right to determine the tip amount, the tip payment cannot be set by an employer, and the customer must have the right to determine who receives the tip payment.

The North Carolina Wage and Hour Act and the Federal Fair Labor Standards Act does not allow an employer to take an employee’s tip directly. However, a valid tip pool allows employers to force employees to pay part of their tips into a tip pool to be shared with other employees. There are specific rules that an employer must follow to have a valid tip pool.

Even though an employer cannot keep an employee’s tips, the employer can receive a credit for those tips earned as if the employer paid the employee directly. Employers may pay employees who work for tips $2.13 an hour, as long as the employee earns enough in tips to bring their total hourly wage to the minimum wage. The minimum wage in North Carolina is $7.25 per hour. This is known as a “tip credit.” If the tipped employee does not earn enough in tips during a shift to meet the minimum wage requirements, the employer has to pay the difference in that amount and the minimum wage. To utilize the tip credit, employers must notify the employee in advance.

If an employee has dual jobs, both as a tipped employee and as a non-tipped employee, the minimum wage calculation changes. Under Federal minimum wage laws, if an employee spends more than twenty percent (20%) of the workweek performing non-tipped duties, the employer has to pay the full minimum wage for those hours and cannot take a tip-credit. For example, a restaurant employee that spends six (6) hours per day earning tips by waiting tables and spends two (2) per day washing dishes must be paid the full $7.25 minimum wage hour for the time spent washing dishes. The employer is not entitled to a tip credit for that time in which the restaurant employee does not work for tips.

If you are working for tips in North Carolina and being improperly compensated for minimum wage or overtime pay, please contact wage and hour employment attorney Karl S. Gwaltney at Attorney Karl S. Gwaltney is available by phone at 919.526.0450 and will provide a free telephone consultation. Karl S. Gwaltney handles employment cases dealing with unpaid minimum wages and overtime throughout Wake County, Cary, Apex, Durham, Vance County, and Henderson. The firm takes certain wage and hour/overtime cases throughout North Carolina, particularly when groups of workers are involved. Contact the firm to discuss your overtime claim today. The unpaid wages attorneys at Maginnis Law, PLLC are often able to represent employees in overtime disputes on a contingency basis, meaning no attorney fees are owed up front and fees are only owed if you recover funds from your employer. Contact our office at (919) 526-0450 or through our contact page.