Illinois Tip Employees Act (2023)

Do you earn tips? Many workers in Illinois do so, including those who serve tables, serve and mix drinks, open doors, carry luggage, clean hotel rooms, or perform other services ranging from moving furniture to delivering newspapers. In fact, some employees earn more from tips from satisfied customers than from simple wages paid by their employers.

When you receive tips as part of your wages, your rights under the wages and hours laws become a bit more complicated. The rules on what counts as a tip, how much your employer has to pay you, and whether you have to contribute to the tip pool (among other things) depend on the law in your state. While federal law also governs these matters, employers must abide by whichever law – federal, state, or even local – is most generous to employees.

Here's what you need to know about federal and Illinois legal protections for tipped employees. For more information on the Illinois minimum wage, tipping policy, overtime standards, and other pay and hour issues, visitIllinois Department of Labor.

Federal and State Tipping Laws

The basic rule regarding tips, under federal and state law, is that they belong to the employee, not the employer. Employers may not require employees to tip unless one of the following exceptions applies:

• State law allows an employer to collect a tip.Some states allow an employer to count all or part of an employee's tips towards their minimum wage obligations. While an employer does not technically "accept" tips from an employee, they can count them as if they were paying them directly to the employee. Illinois allows you to receive a tip as explained below.
• The employee belongs to a valid tip pool.Under federal law and in most states, employees may be required to contribute a portion of their tips to a tip pool that can be shared with other employees.

Minimum Wage in Illinois

Minimum wage laws protect all workers whether they are tipped or not. Workers are entitled to the full hourly minimum wage established by federal or state law. Currently, the federal minimum wage is $7.25 an hour.

The minimum wage in Illinois is $13.00 as of 2023. However, employers may pay new employees a minimum wage of $12.50 for the first 90 days of employment. Because both Illinois rates are above the federal minimum wage, Illinois workers are entitled to the applicable state wage.

Credits for tips

State laws vary as to whether the employer must pay the full minimum wage himself or whether he can count the employee's tips into his minimum wage obligation. Under federal law and in most states, employers may tip employees less than the minimum wage as long as the employees earn enough from tips to cover the difference. This is called a "tip credit".

The credit is an amount that the employer does not have to pay, so the applicable minimum wage (federal or state) less tips is the lowest amount an employer can tip employees per hour. If an employee does not earn enough tips in a given week to earn at least the applicable minimum wage for each hour worked, the employer must pay the difference.

Illinois law allows employers to claim tips. The amount of the tip is 40% of the minimum wage. This means employers can tip workers at an hourly rate as low as $7.80. However, if this lower minimum wage plus the tips an employee actually earns does not add up to at least the full state minimum wage, the employer must pay the difference.

Double work

Some employees have double jobs and spend part of their shift doing untipped work. Under a 2018 change in federal law, if an employee performs related non-tipping duties at the same time as, or within a reasonable amount of time immediately before or after, the tipped duties, the employer may collect tips for the time spent on those non-tipping duties they give tips. - gratuity duties.

Example. The waitress spends six hours at her eight-hour tables; the rest of his time is spent cleaning and filling gas stations, preparing cold salads and desserts, and brewing coffee. An employer can claim a tip for all eight hours of a waitress shift.

However, employers may not tip for time spent by their employees performing tasks unrelated to the duties covered by the tipping or tasks not performed during or immediately before or after the tipping.

Example. The waiter spends six hours at his eight-hour tables; he spends the other two hours running personal errands for his employer. The employer cannot claim tips for these two hours of non-tipping work, as they are not related to the duties of a tipped waiter.

Are tipped workers entitled to overtime in Illinois?

An Illinois employee who receives a tip is entitled to overtime if they work more than 40 hours a week.

The overtime rate in Illinois is typically 1.5 times the employee's normal hourly wage. However, if a tipped worker works overtime, their overtime pay is based on the state minimum wage, not the lower hourly wage they receive from their employer.

Illinois tip pooling laws

Many states, including Illinois, allow employers to require tip pooling or "tipping". All employees included in the pool must contribute a portion of their tips, which are then distributed among the group of employees. Employers must notify employees in advance of the tip pool. Besides, employeesan employee may not be required to contribute more than is customary and reasonable to the fund, and the employee must be able to maintain at least the full minimum wage. (In other words, if an employer takes tips, it can only count the tips the employee takes home towards his or her minimum wage obligation.)

Under federal law, if an employer applies for tips, only employees who regularly receive tips may be included in the tip pool. Employees may not be required to share tips with employees who do not normally receive their own tips, such as dishwashers or cooks, unless the employer does not claim tipping and pays the employee directly the minimum wage. Tips from the tip pool cannot go to employers, managers or supervisors.

What is a tip?

Figuring out exactly how much a customer is paying is a "tip" - it's not as simple as you might think. If a customer pays in cash and tipping is voluntary, a tip is any amount the customer leaves over and above the payment for products or services (plus tax).

However, if the employer imposes a mandatory service charge or the customer pays by credit card, the rules may be different.

Is the mandatory service charge a tip?

Some restaurants add a "mandatory service charge" to bills for large tables, private parties, or catered events. Under federal law and in most states, this is not considered a tip.

Even if the client believes the money is going to you and leaves nothing extra on the table, your employer can keep any money marked as a 'service charge'. The law commonly treats this part of the contract between the patron and the facility, not the employee's voluntary acknowledgment of good service.

Many employers pass on at least some of these service charges to employees, but this is the employer's choice: employees are not entitled to this money.

Several states have different rules to ensure that customers know whether their money is going to the employer or to the server. Illinois, however, is not one of them.

Please note that any part of such a fee that an employer pays to employees should be treated as wages and not tips. This means that the employer must collect and pay Social Security and Medical Care (FICA) tax on these amounts, cannot claim a tax credit for these amounts (as is the case with tips) and must include them in the settlement of an employee's hourly remuneration when determining remuneration for overtime, e.g.

To the extent employees do not fully report their tipping income, employees receiving all or part of a service charge will also not be happy with this change.

The rule applies only to mandatory service charges. All of the following conditions must be met for this amount to count as a tip and not a service charge:

• The payment must be completely voluntary
• The customer must have unlimited right to determine the amount
• The amount cannot be set by employer policy or negotiated with the employer.
• The customer must have the right to decide who receives the payment.

Can an employer deduct credit card fees from tipping in Illinois?

State laws vary as to whether employees are entitled to the full amount of a credit card tip. If an employer must pay a processing fee to the credit card issuer, some states allow the employer to deduct a prorated tip amount to cover the employee's "part" of the fee. For example, if the credit card company charges a 3% fee, the employer can legally reduce the employee's tip by 3%.

Illinois law does not prohibit employers from reducing the tip actually paid to an employee to cover the employee's prorated credit card processing fee.