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Q. What is a “tip credit” and what effect does it have upon the minimum wage paid to “tipped employees” in Florida?

what is a tip credit

by Tanya Reed on June 28, 2010

Under Florida law, employers are required to pay employees the state minimum wage rate for all hours worked unless, the federal minimum wage becomes higher than the state rate or the employee is a “tipped employee.”

A “tipped employee” is one who customarily and regularly receives more than $30 per month in tips.  Under both federal and Florida law, employers are permitted to apply a “tip credit” against the minimum wage rate the law otherwise would require the employer to pay its employees.  The Florida tip credit is set in Article X §24 of the Florida Constitution at $3.02 (the FLSA tip credit in 2003)  Therefore, in Florida, employers may pay tipped employees a direct wage that is equal to the minimum wage rate minus $3.02.

Prior to July 24, 2009, the Florida Minimum Wage rate for 2009 was $7.21 per hour or $4.19 in

direct wages for eligible tipped employees.  However, in the event that the federal minimum wage rate is higher than the state minimum wage rate in Florida, federal law dictates that employers must pay the federal minimum wage rate.  On July 24, 2009, the federal minimum wage rate rose to $7.25 per hour thereby requiring Florida employers to pay $7.25 per hour or $4.23 for eligible tipped employees.

Unfortunately for employers of tipped employees, under the Florida Constitution, the tip credit is set at $3.02 per hour and is not adjusted by the rate of inflation each year.  Under federal law, as the federal minimum wage increases, as does the federal tip credit.  Under Florida law, the minimum wage increases but the tip credit remains the same thus increasing the direct wage that must be paid to a tipped employee each year.

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