[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR531.59]

[Page 174]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 531_WAGE PAYMENTS UNDER THE FAIR LABOR STANDARDS ACT OF 1938
--Table of Contents
 
                        Subpart C_Interpretations
 
Sec. 531.59  The tip wage credit.

    In determining compliance with the wage payment requirements of the 
Act, under the provisions of section 3(m) the amount paid to a tipped 
employee by an employer is deemed to be increased on account of tips by 
an amount which cannot exceed 50 percent of the minimum wage applicable 
to such employee in the workweek for which the wage payment is made. 
This credit is in addition to any credit for board, lodging, or other 
facilities which may be allowable under section 3(m). The credit allowed 
on account of tips may be less than 50 percent of the applicable minimum 
wage; it cannot be more. The actual amount is left by the statute to 
determination by the employer on the basis of his information concerning 
the tipping practices and receipts in his establishment. However, 
section 3(m) provides that an employee who can show to the satisfaction 
of the Secretary of Labor that the actual amount of tips received by him 
was less than the amount determined by the employer as a tip credit 
shall receive an appropriate wage adjustment. See Sec. 531.50(a). As 
stated in Senate Report No. 1487 (89th Cong. 2d sess.), it is presumed 
that in the application of this special provision the employee will be 
receiving at least the maximum tip credit in actual tips: ``If the 
employee is receiving less than the amount credited, the employer is 
required to pay the balance so that the employee receives at least the 
minimum wage with the defined combination of wages and tips.'' Provision 
is made in Sec. 531.7 for employee requests for review of tip credit 
determinations made by employers, in the event that the employee 
considers that the tip credit taken exceeds his actual tips. As 
indicated in Sec. 531.51, the tip credit may be taken only for hours 
worked by the employee in an occupation in which he qualifies as a 
``tipped employee.'' Under employment agreements requiring tips to be 
turned over or credited to the employer to be treated by him as part of 
his gross receipts, it is clear from the legislative history that the 
employer must pay the employee the full minimum hourly wage, since for 
all practical purposes the employee is not receiving tip income. See 
also Sec. 531.54.