By now, you are probably aware that the minimum wage under the federal Fair Labor Standards Act goes up to $7.25 on July 24, 2009. Employers with operations in Florida know that this is four cents more than the current Florida minimum wage of $7.21. Florida employers must pay the higher of the two wages.
But what’s the minimum wage for tipped employees in Florida as of July 24th? The answer is not as simple as you might think, and you might be misled by reading the Florida Agency for Workforce Innovation web page on the minimum wage. That web page states the new federal minimum wage, and also states that tipped employees must be paid a direct minimum wage of $4.19 as of January 1, 2009. While that’s not inaccurate as far as it goes, the AWI web page does not explain how much tipped employees must be paid in direct wages as of July 24, 2009.
First, some background. Under the FLSA, employers are allowed to claim a “tip credit” toward satisfying state and federal minimum wage laws for their tipped employees. This means that tips are credited against, and satisfy a portion of, the employer’s obligation to pay the minimum wage. Under the FLSA, if an employee retains all tips, and the employee customarily and regularly receives more than $30 a month in tips, an employer may pay a tipped employee not less than $2.13 an hour in direct wages if that amount plus the tips received equal at least the federal minimum wage. If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference. As the federal minimum wage increases, so does the federal tip credit; the direct wage that must be paid to the employee ($2.13) stays the same. (You can read an article I co-authored on FLSA tip credit and tip pooling rules here. )
Not so under Florida law. The Florida Constitution provides that "For tipped Employees meeting eligibility requirements for the tip credit under the FLSA, Employers may credit towards satisfaction of the Minimum Wage tips up to the amount of the allowable FLSA tip credit in 2003." The FLSA tip credit in 2003 was $3.02, i.e. the difference between the minimum wage in 2003 ($5.15) and the reduced minimum wage ($2.13). Therefore, under the Florida Constitution, the tip credit can be no more than $3.02. So, in Florida, as the minimum wage increases, the $3.02 tip credit stays the same, and the direct wage that must be paid to the employee increases. As of January 1, 2009, the direct wage equals the Florida minimum wage ($7.21) minus the 2003 tip credit ($3.02), or $4.19.
As you can see, however, $4.19 is not enough as of of July 24, 2009, because under Florida law the maximum tip credit remains $3.02. An employer that paid only $4.19, and took a tip credit of $3.02, would leave the employee four cents short of the federal minimum wage of $7.25. So, as of July 24, 2009, Florida employers must pay their tipped employees a direct wage of no less than $4.23.