Minimum Wage and Tipping Laws in Arkansas

In the bustling hospitality and service industry, tipped employees play a vital role in delivering exceptional customer experiences while earning a significant portion of their income through tips.

However, the regulations and complexities surrounding the employment of tipped workers can often be confusing for both employers and employees alike.

If you are an employer or a tipped employee in Arkansas, understanding the laws and best practices related to your tipped workers and employees is crucial for ensuring fair compensation and compliance with legal requirements.

Arkansas, like many other states, has specific guidelines and regulations governing tipped employees.

These regulations encompass various aspects, such as minimum wage, tip pooling, record-keeping, and more.

Throughout this article, we will explore the key elements of tipped employment in Arkansas, offering insights into the state’s minimum wage requirements for tipped workers, the rules surrounding tip pooling and tip credits, as well as the obligations and responsibilities of employers in maintaining accurate records and reporting tips.

Additionally, we will address common concerns and provide practical tips to help employers and employees effectively manage and optimize the tipping system.

Whether you are a restaurant owner, a hotel manager, or a tipped employee seeking clarity on your rights and obligations, this comprehensive guide aims to be your go-to resource.

By delving into the intricacies of tipped employment in Arkansas, we will equip you with the knowledge and tools necessary to navigate the complexities of this unique labor landscape.

Why do Minimum Wage Laws not Apply to Tipped Employees?

Minimum wage laws do not apply to tipped employees because of a federal law passed by the United States Congress.  That federal law is called the Fair Labor Standards Act.

The Fair Labor Standards Act has an exemption for a “tipped minimum hourly wage,” which it sets to $2.13 per hour.

What is the Difference in the Minimum Wage and the “Tipped Minimum Wage”?

The federal minimum wage for non-tipped employees is currently $7.25 per hour. However, for tipped employees, the federal minimum wage is only $2.13 per hour. This lower rate of minimum wages is known as the “tipped minimum wage.”

The theory for a tipped minimum wage is that tipped workers are supposed to get paid a portion of their pay in the form of tips from customers. In theory, these tips will bring the employee the total money they get up to at least the federal minimum wage.

What is a “Tip Credit?”

Importantly, if a tipped employee does not earn enough in tips to meet the minimum wage, their employer is required to make up the difference.  This is known as the “tip credit.”

Here is a link to a chart explaining the cash wage tip credit amount in each state that it applies to: https://www.dol.gov/agencies/whd/state/minimum-wage/tipped

However, as explained the chart at the link, the situation from state to state is different.

For instance, some states have set their own minimum wage rates for tipped employees that are higher than the federal standard minimum wage. In these states, the tipped minimum wage is still lower than the regular state minimum wage amount, but the gap between the two is smaller.

Also, employers are required to keep detailed records of their employees’ tips and earnings, and to ensure that their employees are earning at least the minimum wage per hour when tips cash wages are taken into account.

So How did Congress Pass a Law where Regular Applicable Minimum Wage Laws don’t Always Apply to Tipped Employees?

To understand what happened, it is important to look to the history of tipping in the United States. Tipping has a long and troubled history in this country, and different people have different ideas about it.

One theory is that tipping began as a way for wealthy Americans to show off their wealth. By leaving large tips, they could signal to others that they were prosperous. This theory holds that tipping then spread to other segments of society, and tipping became more commonplace.

Some argue that “in the earliest days of the practice, its spread was linked to the racial oppression of the post-Civil War Reconstruction period.” (https://time.com/5404475/history-tipping-american-restaurants-civil-war/ )

Another theory is that tipping was originally a way for customers to pay tipped employees ensure great service. By leaving a tip, they could reward servers who provided excellent service and motivate others to do the same. However, this system can create a power dynamic in which customers had a lot of control over how much money servers earned.

Going back even further, many say that “Tipping began in the Middle Ages in Europe when people lived under the feudal system. There were masters and servants, and there were tips. Servants would perform their duties and be given some pocket change in return. This was still custom in the 18th century and transitioned from masters and servants to customers and service industry workers.” https://www.npr.org/2021/03/22/980047710/the-land-of-the-fee

Why is Tipping Around Today?

Today, tipping is still a common practice in many industries, including restaurants, bars, and hotels.

However, it has again come under scrutiny in recent years, as in years past. Some critics argue that tipping perpetuates inequality by allowing customers to reward or punish workers based on factors like their appearance or demeanor, rather than the quality of their work.

Many also argue it allows owners to unfairly profit off of tipped employees.

Others argue that tipping is simply an outdated and inefficient system. For example, it can be difficult for employers to accurately track tips and ensure that their employees are earning a fair wage. Additionally, some customers may be confused or unsure about how much to tip, which can create awkward or uncomfortable situations.

It is important for workers and employers alike to understand the laws and regulations surrounding tipping, minimum cash wage and the minimum wage.

If you are a tipped employee: it is important to keep track of your tips and earnings to ensure that you are earning at least the minimum wage. If you are not paid enough, you may be able to take legal action to recover the wages you are owed.

If you are an employer of tipped workers: it is important to ensure that you are following all applicable laws and regulations. This includes keeping accurate records of your employees’ tips and earnings, and ensuring that they are earning at least the minimum wage when tips are taken into account.