Wage Laws for Waiters: What Service Industry Workers Should Know

The food service industry is one of the largest sectors of employment in the United States, with millions of workers supporting restaurants, cafes, bars, and hotels nationwide. 

Among these workers, unfortunately, waiters and waitresses are particularly vulnerable to wage violations, including underpayment, illegal tip pooling, and unpaid overtime. 

If you're a server, it’s important to understand your wage rights under federal and state law, because being “tipped” doesn’t mean being shortchanged.

At Morgan & Morgan, we believe in fair treatment for all workers, especially those who are the backbone of the hospitality and service industries. If you’ve been cheated out of your hard-earned wages, contact us today for a free case evaluation to learn more about your legal options. 

The Federal Minimum Wage for Tipped Employees

Under the Fair Labor Standards Act (FLSA), the federal minimum wage is $7.25 per hour. However, for tipped employees, the law allows employers to pay a lower hourly wage, as long as tips make up the difference.

The Tip Credit

The federal tipped minimum wage is $2.13 per hour. Employers can claim a tip credit of up to $5.12 per hour, as long as the server makes at least $7.25 an hour after tips are included. If a server does not earn enough in tips to meet the minimum wage, the employer must make up the difference.

For instance, if you only earn $3 an hour in tips during a slow shift, your employer must pay an additional $4.25 per hour to ensure you earn $7.25 per hour total.

State and Local Wage Laws May Offer More Protection

Many states (and some cities) have higher minimum wage laws than the federal government, and not all allow a tip credit.

States without a tip credit, where employers must pay full minimum wage, include:

• California
• Nevada
• Oregon
• Washington
• Alaska

In these states, servers are entitled to the full state minimum wage in addition to tips.

Other states, like New York, Florida, and Illinois, allow a tip credit but require higher base pay than the federal minimum. Always check your state and local laws. You might be entitled to more than you think.

What Counts as a Tip?

A tip is money freely given by a customer to a worker for services provided. Tips belong to the employee, not the employer.

However, tips are NOT:

• Mandatory service charges (a 20% “gratuity” added to the bill)
• Bonuses or commissions
• Shared revenue from the restaurant

Employers cannot keep tips, nor can they require employees to hand over their tips to management or non-tipped workers (with some exceptions in tip pooling, covered below).

The Rules Around Tip Pooling

Tip pooling is the practice of combining all tips collected and redistributing them among employees.

Legal tip pooling must be limited to employees who customarily and regularly receive tips (servers, bartenders, bussers). Employers and managers cannot take a share of the tips.

Illegal tip pooling can involve sharing tips with kitchen staff (in most states that use the tip credit) or including owners, managers, or supervisors in the tip pool. Failing to notify employees in advance about the tip pool arrangement is also illegal.

If your employer is taking part of your tips or forcing you to share with non-tipped staff, you may have a legal claim.

Side Work and the 80/20 Rule

Many waiters perform "side work" tasks such as rolling silverware, wiping down tables, or preparing condiments. But how much of this non-tipped work can be done while still earning the tipped wage?

“The 80/20 Rule” (now known as the 80/20/30 Rule) states that employers can only take the tip credit if no more than 20% of your time is spent on non-tipped tasks. If more than 30 continuous minutes are spent on non-tipped work (setting up the dining room before opening), employers must pay the full minimum wage for that time.

If you're doing excessive prep or cleaning outside your serving duties and still only being paid the tipped minimum wage, this could be illegal.

Overtime Laws for Waiters

Like all non-exempt workers, waiters are entitled to overtime pay when they work more than 40 hours in a workweek.

Overtime pay must be paid at 1.5 times the regular rate of pay. It applies to all hours worked beyond 40 per week, regardless of tip credit status.

If your regular rate (after tips) is $10 per hour, overtime should be at least $15 per hour.

Employers cannot average hours over two weeks to avoid paying overtime, nor can they ask you to work “off the clock.”

Common Wage Violations in the Restaurant Industry

Unfortunately, wage theft is widespread in the food service industry. 

Some of the most common violations include:

• Not making up the difference if tips don’t bring wages up to the legal minimum
• Making illegal deductions for broken dishes, walkouts, or uniforms
• Misclassifying workers as exempt to avoid paying overtime
• Forcing employees to work off the clock before or after shifts
• Improper tip pooling or tip stealing
• Not paying for training or mandatory meetings

If any of these apply to you, you may be owed back pay, damages, and legal fees.

What About Credit Card Fees on Tips?

Some restaurants deduct credit card processing fees from tips paid by customers via credit card. Is that legal?

According to federal law, employers can deduct a prorated credit card fee from tips, but only if it doesn’t reduce your pay below minimum wage.

If a customer tips $10 via credit card, and the processing fee is 3%, the employer may legally pay you $9.70—if your total pay (including base wage) still meets the minimum wage requirement.

What to Do if You Think Your Wage Rights Are Being Violated

If you suspect wage theft or illegal employment practices, you don’t have to stay silent. Here are the steps you can take:

1. Document Everything

Keep a record of your hours worked, and save copies of pay stubs and tip reports. Take notes on any instructions given by managers regarding tip sharing or side work.

 

2. Talk to Other Employees

If your coworkers are experiencing the same issues, a joint complaint may be more powerful.

3. File a Complaint With the Department of Labor

The U.S. Department of Labor’s Wage and Hour Division (WHD) investigates FLSA violations. You can file a complaint anonymously.

4. Contact Morgan & Morgan

At Morgan & Morgan, we represent workers who’ve been taken advantage of by their employers. We fight to recover unpaid wages, overtime, and damages for wage theft, and we never charge upfront fees.

How Morgan & Morgan Can Help

We’ve handled thousands of wage and hour cases across the country, and we’re not afraid to take on big restaurant chains or franchise owners. Whether you're a waiter in a small diner or a high-end bistro, the law protects your right to be paid fairly for your time and your work.

We may be able to help you recover back pay for minimum wage and overtime violations, tips wrongfully withheld, and even liquidated damages (often equal to the unpaid wages).

We take on these cases on a contingency fee basis, which means you don’t pay us unless we win.

Being a waiter isn’t easy. You’re on your feet all day, juggling customers, managing stress, and working odd hours, including nights, weekends, and holidays. You should never have to worry about being paid less than what you’ve rightfully earned.

Whether you work in a bustling city or a small town, you have legal rights, and if those rights have been violated, Morgan & Morgan is here to help. Hiring one of our lawyers is easy, and you can get started in minutes with a free case evaluation.