Food truck tip laws, or “guidelines,” are established by the U.S. Department of Labor through the FLSA (Fair Labor Standards Act). Essentially, the Department of Labor establishes standards that all food trucks and restaurants must adhere to regarding minimum wage and overtime pay.
If you have a food truck employee who you pay on a weekly salary basis, as opposed to hourly, that employee is considered exempt from minimum wage and tip regulations. But in the case of food trucks and other food service employers, most employees are what is classified as non-exempt. This means you must pay them, and treat their tips, in accordance with FLSA guidelines.
How Food Truck Tip Laws Work
Food truck owners must see to it that their tipped employees earn at least the federal minimum wage (which is currently $7.25 an hour). But how you arrive at that $7.25 figure is where the tip credit comes in. Let’s say that your food truck employee earns tips as part of their job. Tipped employees are defined as those who customarily and regularly receive more than $30 per month in tips.
Food truck tip laws permit you, the food truck employer to take a “tip credit” toward your minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. Thus, the maximum tip credit that you can currently claim under the FLSA is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13).
But what if an employee works in both a tipped and a non-tipped capacity? This could include a line cook and window service attendant. The tip credit is available only for the hours spent by the employee in the tipped occupation.
So how are you supposed to handle tips that are charged on a credit card? You must pay the credit card company a percentage on each sale, and the employer may pay the employee the tip, less that percentage.
The Bottom Line
While it seems straightforward, the tangle of laws and responsibilities makes managing this process rather complex. Make sure you speak with your accountant if you still need more information on food truck tip laws.
Do you have tipped employees in your mobile food business? Have you had to deal with food truck tips laws? Share your thoughts on this topic in the comment section, our food truck forum or social media. Twitter | Facebook
DISCLAIMER: Mobile Cuisine and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Consult your own tax, legal and accounting advisers before engaging in any transaction.