What is the current federal minimum wage?
Who is covered by federal minimum wage law?
What am I required to pay tipped employees?

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The information below is intended only to inform and not to be a substitute for the reader's seeking legal counsel. Any information given here should be examined by the reader's attorneys as to such information's applicability.

What is the current federal minimum wage?

Restaurants covered by federal minimum wage law (a.k.a. the Fair Labor Standards Act, or FLSA) are required to pay hourly employees at least $5.15 an hour, and tipped employees a cash wage of at least $2.13 an hour.

You may be required to pay a rate higher than that, though. States are free to set their own wage rates — and when they do, employers who are covered by the FLSA must pay whichever rate, state or federal, is most favorable to the employee.

National Restaurant Association members can check our members-only area for a compilation of required wage rates by state.

Are all employers covered by federal minimum wage laws?

You are covered by federal minimum wage law if your enterprise has annual sales of $500,000 or more.

Regardless of your sales volume, if you have any employees who engage in "interstate commerce" (example: employees who regularly take out-of-state phone calls, process credit cards from out of state, unload goods shipped from another state, etc.), these employees are covered by the Fair Labor Standards Act.

If your sales volume is under $500,000 a year, you are probably covered by state law and should check with your state restaurant association or state labor department for more details.

What am I required to pay tipped employees?

That depends on your state. The required cash wage for tipped employees under federal law is currently $2.13 an hour. That means employers in states that follow federal law can pay tipped employees a cash wage of $2.13 an hour and apply tip earnings toward the balance of the minimum wage obligation. (This is called taking a "tip credit.")

To illustrate: Under current federal law, FLSA-covered employers may pay a cash wage of $2.13 and take a tip credit of up to $3.02 an hour ($2.13 cash wage + $3.02 tip credit = $5.15 minimum wage). In all cases, an employer may take the tip credit only to the extent that employees actually receive that much in tips.

Not all states follow federal law, however. Some do not allow employers to take the full federal tip credit of $3.02; some do not permit any tip credit at all. In these cases, the law most favorable to the employee prevails. The National Restaurant Association's wage chart (in our members-only section) has details on the minimum cash wage you must pay your tipped employees.

June 3, 2001