Can My Employer Take My Tips from My Paycheck?

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Can My Employer Take My Tips from My PaycheckIf you work in the service industry, you know that your tips can be your bread and butter. And if you don’t know already, your employer generally has no right to keep your tips. Are you looking at your pay stubs and thinking, “Is it legal when my employer takes tips from my paycheck?” Employers that engage in tip withholding have likely broken the law. However, there are legal ways that your employer can reduce your pay based on the tips you have received. 

To ensure that you receive all wages and tips you rightfully earned from your labor, speak to a wage and hour attorney. At Smithey Law Group LLC, our award-winning attorneys focus exclusively on employment law, and we are well-versed in holding employers accountable for tip and wage theft. 

What Does the Law Say About an Employee’s Right to Tips? 

Under the federal Fair Labor Standards Act (FLSA), an employer that takes tips from an employee breaks the law. But while an employer cannot take your tips, federal and Maryland wage laws allow an employer to reduce the pay of tipped employees by using the following methods

  • Tip crediting,
  • Tip pooling, 
  • Retaining credit card processing fees, and
  • Retaining service charges.

If your employer wants to use these methods, it must comply with strict requirements. And with the help of Smithey Law Group, you can ensure your employer is not dishonestly hiding behind pay reduction practices to avoid compensating you for your hard work. 

Tip Crediting

Both federal and state laws require employers to pay their tipped employees minimum wage. But an employer is allowed to offset an employee’s hourly wage by the amount of money they earn in tips.

Maryland’s minimum wage is $12.50 per hour (which is significantly higher than the federal minimum wage). However, a Maryland employer can pay an employee as little as $3.63 per hour if that employee earns more than $30 per month in tips, and their tips make up the difference between the employer’s payment and minimum wage. 

If your employer engages in tip crediting like this, make sure your employer is crediting correctly. If part of your work for your employer is not tipped work (e.g., performing the duties of a shift manager), your employer cannot pay you less than minimum wage for the non-tipped work and cannot use your tips to subsidize that work. 

Tip Pooling

Your employer cannot keep your tips for itself or other managing staff, but your employer can redistribute your tips to other workers that support your tipped work, such as:

  • Cleaning crew, 
  • Cooks,
  • Stockers,
  • Bussers,
  • Hair washers, and 
  • Other auxiliary staff. 

Although your employer has this discretion, it cannot pool tips as an afterthought. Before pooling their tips, an employer must let each employee know about its tip pooling policy. 

Retaining Credit Card Processing Fees

Oddly enough, not all money is equal in the service industry. It is more expensive for businesses to accept payment by credit card than by cash. The added expense of taking credit typically has to do with the fees a business has to pay for credit card processing. If you receive a tip by credit card, your employer can retain an amount of your tip that is equal to (but does not exceed) the fee your employer has to pay to process the tip payment. 

Retaining Service Charges

Not every payment a patron makes that exceeds the cost of what they purchased is a tip. Some establishments charge customers a mandatory service fee, usually because of the size of a customer group. If a patron pays a mandatory service fee, this is not always a tip to which you are entitled, and your employer has a right to keep the fee payment for its own purposes.  

Any one of the above wage reduction actions can be fraught with gray areas or subject to abuse. And unfortunately, some employers abuse the wage and hour laws to illegally keep more money for themselves. If your paychecks and tip distributions are lower than you anticipated, speak to a skilled attorney regardless of whether your employer gives you a “legal” explanation for its actions. 

What Can I Do If My Employer Illegally Takes My Tips from My Paycheck? 

The first thing you should do when an employer wrongfully withholds your earnings from you is to speak to an attorney. Bring your pay stubs, employer policies, and any other information about your earnings to your consultation with a lawyer and any follow-up meetings. Your attorney can review the facts of your case and develop the best course of action for recovering all of your pay. 

With an attorney’s help, you may need to first send a written and respectful letter to your employer asking for missing wages. And if your employer does not appropriately respond to your payment request, you can file a lawsuit, a wage complaint with the Wage and Hour Division of the U.S. Department of Labor, or a wage complaint with the Maryland Department of Labor.

Because Maryland’s minimum wage is significantly higher than the federal minimum wage, you are normally better off filing wage complaints with the Maryland Department of Labor. You have two years to file a wage complaint with the Maryland government and three years to sue for wages in court. If part of your pay is missing, speak to your attorney immediately so they can initiate legal proceedings as soon as possible. 

Smithey Law Group Can Help Protect Your Hard-Earned Pay

Receiving the fruits of your labor is important, and Smithey Law Group can help ensure that your employer pays you every cent you have earned. We are in-demand advocates, leaders, and educators in the Maryland employment law community. Our attorneys have also won several awards and legal recognition for top-notch advocacy. We are experienced and have helped many employees get the compensation they deserve. Whenever you need help, you can call us at 410-881-8994 or contact us online

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Joyce Smithey, a seasoned employment and labor law attorney, has over 22 years of experience representing both employers and employees in Maryland and D.C. Her practice, rooted in a deep understanding of employment law, spans administrative hearings to federal litigation. Joyce's approach is comprehensive, focusing on protecting client interests while ensuring legal compliance. A Harvard graduate, her career began in Fortune 500 companies, transitioning to law after a degree from Boston University School of Law. Joyce's expertise is recognized by numerous awards, including Maryland’s Top 100 Women. At Smithey Law Group LLC, which she founded in 2018, Joyce continues to champion employment rights, drawing on her rich background in law and business.

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