As with employees in many other industries, restaurant employees might have to work overtime or volunteer to do so. When applying labor laws regarding overtime pay to some restaurant employees, the tricky part becomes how to calculate their overtime rate. Because employees such as waiters, waitresses and bartenders earn part of their compensation in tips, employers must follow special overtime laws for tipped workers.
According to federal labor laws, employees receive overtime pay for labor they perform in excess of 40 hours a workweek. Overtime pay is at least 150 percent of an employee's regular rate. Meanwhile, the standard minimum wage — $7.25 an hour at the federal level as of 2011 — does not apply to tipped employees. Employers can pay tipped employees as little as $2.13 an hour, although they must increase that rate as needed to ensure employees' wages and tips combine to equal the minimum wage or higher. These rules means the calculation of overtime pay works differently for tipped employees.
Employers must apply tipped employees' hourly wage rate when determining overtime compensation. That rate can never be less than the minimum wage even if the employer is actually paying less by taking a tip credit. Take the example of a waiter who receives $2.13 an hour and enough in tips to make at least the minimum wage per hour. The employee's overtime wage would be 150 percent of $7.25 — the standard minimum wage — rather than $2.13. If the waiter receives a base wage higher than $7.25, in addition to tips, 150 percent of that higher amount would be his overtime wage.
Employers can take a tip credit out of a tipped restaurant employee's overtime wages, but the credit cannot be higher than the one the employer applies to regular wages. In the above example of a waiter who receives $2.13 an hour in base wages, the tip credit is $5.12 an hour relative to the required minimum wage of $7.25. The employee's base overtime wage would be 150 percent of $7.25, or $10.88 per overtime hour. The employer can take out the standard tip credit of $5.12, leaving the waiter with $5.76 per overtime hour plus tips. The employer may not take a deduction of 150 percent of the standard tip credit.
Non-tipped employees who work in restaurants, such as dishwashers or cooks, must receive at least the hourly minimum wage. No tip credit factors into either their regular wages or overtime wages. Employers can take a tip credit out of tipped employees' wages, for both regular hours and overtime hours, only after following certain rules. Tipped employees must be able to keep all tips, rather than paying a portion to employers. Employees might have to give up some of their tips only if they are part of a tip pool with fellow employees. The tip pool may include only employees who receive tips.