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Be paid fairly as a tipped employee

Arizona law allows employers to take a “tip credit” toward the state minimum wage only when strict conditions are met.

Under A.R.S. § 23‑363, an employer may pay tipped employees a reduced hourly wage ($3 less than the Arizona minimum wage currently in place of $14.70 per 2025) so long as tips bring total earnings up to at least the minimum wage of $14.70 per hour.

💳Arizona Tip Credit Legal Requirements: 2025 Arizona Rates:
        Employers may claim a tip credit of a maximum $3.00/hour under A.R.S. § 23-363(C). Minimum Cash Wage: Tipped employees must receive at least $11.70/hour direct pay plus tips to reach $14.70 minimum wage.
    

Employers must also satisfy detailed notice, pooling, and record‑keeping requirements to use the tip credit legally. When these rules aren’t followed, tipped employees may be owed unpaid wages, but also statutory penalties and attorneys’ fees.

At Frankel Syverson PLLC, our Arizona employment attorneys help tipped workers understand their rights, recover unpaid wages and tips, and hold employers accountable under state and federal law.

The list below contains common violations of the “tip credit” by employers in Arizona:

Inadequate notice: Employers may fail to provide the required written notice to tipped employees regarding the tip credit, cash wage rate, tip requirements, and tip pooling policy.
Misuse of tips: Employers may unlawfully retain a portion of the tips that should be distributed to tipped employees through a tip pooling arrangement. Employers should not keep any portion of tips meant for employees, except as permitted by specific tip pooling regulations.
Improper distribution of pooled tips: If a tip pooling arrangement is in place, employers must ensure that the distribution of pooled tips among employees complies with the law. Some types of distributions of pooled tips can be a violation, such as including employees like managers who do not customarily or regularly receive tips in the tip pool or business owners taking some of the employees’ tips.
Failure to make up the difference and pay the minimum wage: If a tipped employee's total earnings, including tips, do not average out to at least the minimum wage rate, the employer is responsible for providing additional "make-up" pay to meet the minimum wage.
Unauthorized deductions: Employers cannot make unauthorized deductions from an employee's tips that would bring their earnings below the minimum wage. Deductions for items like cash register shortages, breakages, or walkouts generally cannot be taken from tips or the employees’ wages such that it reduces them to below the minimum wage.

👥Legal Tip Pool Participants Only:
        Arizona law permits only employees who customarily and regularly receive tips to participate in tip pools (servers, bartenders, hosts, bussers). Prohibited Participants: Managers, supervisors, back of house kitchen staff, and business owners cannot participate in or receive employee tips. If prohibited participants like managers retain any tips from front of house staff as part of a tip pool, the tip pool is unlawful and the employees would likely have claims for unpaid tips and unpaid minimum wage due to the tip credit being invalid.
    

Our Arizona Tipped‑Employee Attorneys Have Extensive Experience

Tipped‑wage violations often arise from:

Improper tip credit usage, where employers fail to meet tip pool eligibility criteria but still pay a reduced cash wage.
Inadequate or no written notice about the employer’s intent to claim a tip credit.
Unlawful tip pooling, such as including non‑tipped staff (e.g., managers or back‑of‑house employees) in the tip pool.
Failure to “make up” the difference when an employee’s combined tips and cash wage do not equal the minimum wage.
Unauthorized deductions from tips (like cash register shortages, breakages, or walk‑outs) that reduce a tipped worker’s effective hourly earnings below the legal minimum.

Our attorneys have successfully represented tipped employees in claims to recover unpaid wages, penalties, and legal fees.

Common Tip Credit Violations

No or inadequate notice of the tip credit requirement and cash wage rate for tipped employees.
Misuse of tips by retaining portions of employees’ tips outside the scope of lawful tip pooling.
Illegal inclusion of non‑customarily tipped employees in a tip pool (e.g., managers, back of house staff).
Failure to ensure total earnings meet the minimum wage.
Unlawful deductions from tip earnings for cash register shortages, breakages, or other expenses.

Examples of Tipped‑Employee Cases

Restaurant servers paid a sub‑minimum cash wage without a proper tip‑credit notice.
Bar staff whose tip pools included back-of-house kitchen and management staff, diluting their earnings.
Waitstaff owed make‑up pay after reporting that their combined tips and cash wages fell short of minimum wage.
Caterers and event staff subject to unauthorized deductions from tips for equipment losses.

How Our Attorneys Can Help You

At Frankel Syverson PLLC, we offer guidance through the legal process of recovering unpaid wages:

Initial Consultation: We evaluate your specific situation and explain your legal options regarding unpaid wages.
Documentation Review: We help assess your employment records, pay stubs, and other relevant documentation.
Legal Representation: Our attorneys handle the legal aspects of your wage claim, from filing necessary paperwork to representing you throughout the process.
Pursuing Available Remedies: We seek all legally available remedies, which may include unpaid wages and potential liquidated damages in certain cases.

Understanding Your Legal Options

Employers may take a tip credit of up to $3.00 per hour toward the Arizona minimum wage only if the employees in the tip pool “customarily and regularly receives tips”, as provided in A.R.S. § 23-363(C).

📄Mandatory Written Notice Requirement:
        Before claiming the tip credit, employers must provide written notice detailing $11.70 cash wage rate, $3.00 tip credit amount, and the tip pooling policies. Failure Consequence: No written notice = no valid tip credit = employer owes full $14.70/hour minimum wage retroactively.
    

Employers are required to give written notice to tipped employees regarding the use of a tip credit, the hourly cash wage being paid, and any tip pooling arrangements.
Tip pooling is only lawful if limited to employees who customarily and regularly receive tips, such as servers and bartenders. Employers cannot include managers, supervisors, or non-tipped staff in a tip pool.
If an employee’s total tips and cash wage do not equal at least the minimum wage, the employer is legally required to make up the difference. Failing to do so violates Arizona and federal wage law.
Any unauthorized deductions from an employee’s tips, such as for register shortages, broken equipment, walk-outs, or other costs, are unlawful and may lead to claims for unpaid wages and penalties under Arizona and federal law.

Frequently Asked Questions (FAQs)

What is a tip credit and how does it work in Arizona?

A tip credit allows employers to pay tipped employees a reduced cash wage, no lower than $11.70 per hour in 2025, provided tips bring total earnings to at least the $14.70 state minimum wage (A.R.S. § 23‑363).

Does my employer have to give me written notice before using a tip credit?

Yes, employers must provide written notice to tipped employees about the cash wage being paid, the tip credit being claimed, and any applicable tip pool arrangements before using a tip credit.

Who is allowed to be included in a tip pool in Arizona?

Only employees who customarily and regularly receive tips can participate in a tip pool, such as servers, bartenders, and bussers. Managers, supervisors, kitchen staff, and other non-tipped employees may not be included.

What happens if my tips plus cash wage don’t equal Arizona’s minimum wage?

If a tipped employee’s combined tips and cash wage fall below the $14.70 per hour minimum wage in 2025, the employer is legally required to pay the difference as make-up pay. Failing to do so violates Arizona minimum wage law.

🛡️Mandatory Make-up Pay Protection:
        Employer Legal Obligation: If a tipped employee's total earnings (tips + $11.70 cash wage) fall below $14.70/hour Arizona minimum, the employer must pay the difference immediately. No Exceptions Allowed: Make-up pay requirement applies every pay period under A.R.S. § 23-363 regardless of tip fluctuations.
    

Can my employer deduct money from my tips for shortages, breakages, or walkouts?

No. Employers are prohibited from taking unauthorized deductions from an employee’s earned tips. This includes deductions for cash register shortages, broken dishes, or unpaid customer tabs.

🚫Zero Tolerance for Unauthorized Tip Deductions:
        Strictly Prohibited Deductions: Employers cannot deduct from tips for cash register shortages, equipment breakages, customer walk-outs, uniforms, or training costs. Legal Protection Guarantee: Any deduction reducing effective wage below $14.70/hour violates Arizona law and triggers penalties plus attorney fee liability.
    

Take action to recover your tips and wages.

If your employer misused the tip credit, mishandled your tip pool, or failed to pay you wages when your tips did not bring your hour wage to the Arizona minimum wage requirement, the tipped‑employee attorneys at Frankel Syverson PLLC are ready to fight for you.

Get in touch