Montana Tipped Minimum Wage Laws for 2022, 2023
Montana labor law allows tipped employees to be paid a lower cash wage than the standard Montana minimum wage by their employers, with different allowed tip credits applying to different classes of employer.
Montana does not specify a minimum amount of tips an employee must receive in order to be classified as a "tipped employee". Therefore, any employee who receives tips can be paid according to Montana's tipped minimum wage laws.
Business with gross annual sales over $110,000:
Business with gross annual sales under $110,000:
A business not covered by the Fair Labor Standards Act whose gross annual sales are $110,000 or less may pay $4.00 per hour, however, if an individual employee is producing or moving goods between states or otherwise covered by the federal Fair Labor Standards Act, that employee must be paid the greater of either the federal minimum wage or Montana's minimum wage.
Tipped Employee Labor Laws in Montana
In addition to state regulations, tipped employees in Montana are subject to a number of Federal labor laws specified under the Fair Labor Standards Act (FLSA).
Montana Tipped Employees and Overtime Pay
Most tipped employees in Montana will qualify for overtime pay when they work over a certain number of hours in a week. Overtime hours legally pay 1.5 times the employee's normal hourly wage.
In the event of a tipped employee earning overtime hours, their overtime rate is calculated based on the full minimum wage, not the lower cash wage being paid by the employer. The employer is not allowed to take a higher tip credit for overtime hours than nonovertime hours.
Tip Sharing / Tip Pooling in Montana
Under Federal law, "tip pooling" is allowed as long as all of the employees who are members of the tip pool customarily and regularly receive tips (such as waiters, waitresses, bellhops, bussers, counter personnel, bartenders, etc). A valid tip pool may not include employees who do not regularly receive tips, such as cooks, dishwashers, chefs, janitors, etc.
Aside from a valid tip pooling agreement as specified here, tips are the property of the employee who received them and cannot be claimed by the employer under any circumstances.
Tipped Employees and Dual Jobs
Many tipped employees are also expected to carry out work activities for which they will not receive tips, like washing dishes or janitorial work, as a "side job" or "dual job". According to Federal law, if these non-tipped acticities take up more than 20% of the employees' time, the tip credit is only allowed for hours spent by the employee in the tipped occupation.
Service Charges vs Tips
Many restaurants collect a mandatory service charge from all customers, or from parties of certain sizes. Serviuce charges are not tips, and under the FLSA any portion of thet service charge paid to the employee cannot be used by the employer for a tip credit.
Reporting Tips in Montana
The tip-credit system relies on tipped employees accurately reporting all of their tips to their employers, which allows employers to apply tip credits to their wages as well as accurately report their employees' incomes. In practice, employers will often pressure tipped employees to report at least $0.00 in tips per hour, which allows the employer to apply the maximum tip credit to their wages (and therefore pay the lowest legal cash wage).
Tips are subject to both Federal and Montana taxation. Unlike wages, where payroll taxes (social security and medicare) are split between the employer and the employee, employees are responsible for paying 100% of the payroll tax on earned tips.
Tipped Employee Wage Deductions
Under Federal law, employers may not make any deductions from an employee's wages (for things such as walk-outs, breakage, or cash register shortages) that will bring that employee's hourly wage below the minimum wage. Thus, for Montana employees earning $9.95 (the minimum wage) per hour, no such deductions can be made.
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To learn more about tipped workers' rights and wage laws under the FLSA, check out the Department of Labor's fact sheet "Tipped Employees Under the Fair Labor Standards Act" here , or call the Department of Labor's free help hotline from 8am to 5pm with questions at 1-866-4USWAGE (1-866-487-9243).