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Be paid fairly as a tipped employee

In Arizona, tipped employees are subject to specific regulations under the Arizona Minimum Wage Statute. Employers in Arizona can take a “tip credit” toward the minimum wage for tipped employees only in very specific circumstances. The tip credit allows employers who meet the strict requirements to pay tipped employees a lower cash wage than the minimum wage, as long as the employee's total earnings (including tips) average out to at least the minimum wage rate.

The cash wage rate for tipped employees in Arizona was set at $3.00 per hour less than the minimum wage, meaning that since the minimum wage in Arizona in 2024 is currently $14.35, an employer can pay employees an hourly wage of $11.35 and use tips to make up the difference to hit the minimum wage if the employer follows the requirements to use this tip credit.

However, employers in Arizona often have policies that disqualify them from taking a tip credit. For example, an employer cannot require employees to pool their tips if the “tip pool” includes employees who do not customarily or regularly receive tips, making it unlawful to include management or other “back of the house” staff in the tip pool.

There are also very strict notice requirements that an employer must satisfy to utilize the tip credit. Tipped employees must receive written notice that the employer will be utilizing the tip credit to satisfy the minimum wage requirements under Arizona law, and without such notice, the employer would not be allowed to use the tip credit and must instead pay the tipped employees the full minimum wage plus all of their tips.

Even in circumstances where an employer can use the tip credit, 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 ensure the employee receives at least the minimum wage.

The below list 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 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 reduce an employee's tips below the minimum wage.

If you believe you have been deprived of wages or tips you earned, it's time to take action.

Our skilled employment lawyers are here to help you understand your rights, assess the viability of your case, and guide you through the process of initiating legal action for unpaid wages.

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