Tip credit checklist

Static educational checklist — not a calculator. No punch inputs, no live tip-credit math. Use this to spot common FLSA § 3(m) tip-credit red flags (cash wage floor, tip credit limit, side work, tip statements). States differ — some ban or shrink the tip credit; always check state overlays.

What the FLSA tip credit is (and is not)

Under FLSA section 3(m), an employer may take a limited tip credit toward the federal minimum wage for a tipped employee — but only if notice, cash-wage, and tip-retention rules are met. Starting points: 29 U.S.C. § 203(m) (definitions / tip credit), interpretive regs such as 29 CFR § 531.59 (tip credit generally) and eCFR Part 531. This page does not compute your credit.

Checklist — scan cash wage, credit, and tip records

1. Cash wage floor. When a tip credit is claimed, the employer still pays a direct cash wage. Flag if the cash wage looks below the federal tipped cash floor (or a higher state cash floor) while a tip credit is also claimed.
   • Federal baseline: § 203(m) tip-credit structure; DOL WHD materials summarize the current federal cash wage + tip credit split.
   • State overlays often raise or eliminate the cash floor — see outbound tools below (CT / NJ).
2. Tip credit limit. The tip credit may not exceed the gap between the cash wage and the full applicable minimum wage. Flag “tip credit” lines that look larger than that gap, or stubs that never show how cash wage + tip credit reach the min wage.
   • Cite: Cornell LII — 29 CFR § 531.59; eCFR — § 531.59.
3. Notice before claiming the credit. Employers generally must inform tipped employees of the tip-credit provisions (cash wage amount, tip credit claimed, tip retention, tip-pool rules) before taking the credit. Flag workplaces with no tip-credit notice practice.
   • Public reference: Part 531 tip-credit / notice materials via § 531.59 and related Part 531 sections on eCFR.
4. Side work / dual jobs red flags. Long stretches of non-tipped “side work,” unrelated duties, or dual-job setups can undercut a tip-credit claim for those hours. Flag schedules that look mostly non-tipped while the cash wage stays at the tipped rate.
   • Educational only — facts and current DOL / court guidance matter; this checklist does not apply the dual-jobs test for you.
5. Tip statement / tip-pool red flags. Tips belong to the employee (subject to lawful tip pools). Flag mandatory pools that appear to include managers/supervisors or other ineligible people, missing tip reports, or stubs that treat tip credit as if tips never need to make up the minimum.
   • Starting statute text: § 203(m) tip-retention / tip-pool language.
6. States differ — do not stop at federal. Some states disallow a tip credit entirely or set higher tipped cash wages. Always overlay state law on top of FLSA 3(m).
   • Outbound StatutePay tools (not sponsored): Connecticut tip credit, New Jersey tip.
7. OT interaction. Tip credit does not erase overtime analysis. If hours exceed 40, ask whether OT was computed correctly relative to the regular rate / tip-credit rules — see the overtime pay-stub checklist.

Sources (public)

• Cornell LII — 29 U.S.C. § 203 (definitions, including 3(m) tip credit)
• Cornell LII — 29 CFR § 531.59 (tip credit generally)
• eCFR — § 531.59
• eCFR — 29 CFR Part 531 (wage payments under FLSA / tips)
• DOL WHD — FLSA overview

Educational checklist only — not legal advice, not a tip-credit calculator, and not an audit. Always read the full statute/CFR and apply facts, agreements, and state law. States differ. Last updated 2026-09-06. Home · OT stub checklist · Cheat sheet · StatutePay