Do credit card tips go to employees?

Do Credit Card Tips Go to Employees? Yes, and It’s the Law.

In the bustling world of restaurants, bars, and other service industries, tips often make up a significant portion of an employee’s income. But what happens to those tips paid with a credit card? Do they end up in the employee’s pocket or does the employer take a cut? The answer is clear: credit card tips belong entirely to the employee.

This isn’t just a common practice; it’s the law. The Fair Labor Standards Act (FLSA), a federal law governing wage and hour standards, explicitly protects employees’ right to their tips. The FLSA clearly states that employers are prohibited from keeping any portion of an employee’s tips, regardless of whether those tips are paid in cash or via credit card. This means that any credit card processing fees, service charges, or other related costs cannot be deducted from the employee’s tip.

This protection offers crucial financial security for tipped workers. Imagine a scenario where an employer could skim a percentage off each credit card tip. This practice could significantly diminish an employee’s earnings, particularly in an increasingly cashless society. The FLSA safeguards against this by ensuring the full tipped amount, as authorized by the customer, reaches the intended recipient.

It’s important to note that while employers can require tip pooling or sharing arrangements among employees, they cannot participate in these pools themselves. For example, tips might be shared between servers and support staff like bussers or bartenders, but the employer cannot legally dip into this shared pool.

While the FLSA provides a strong legal foundation, employees should still be vigilant. Keeping track of tips received, both cash and credit card, is a good practice. If an employee suspects their employer is unlawfully withholding tips, they should document the discrepancies and report the issue to the appropriate authorities, such as the Wage and Hour Division of the U.S. Department of Labor.

In conclusion, when you tip on your credit card, rest assured that the full amount, as authorized by you, is legally obligated to go to the employee. This protection ensures fair compensation for hard-working service industry professionals and reinforces the importance of tips as a vital component of their income.