Hawaii Tip Laws and Requirements

Under the Fair Labor Standards Act (FLSA), tips are regulated. Employers who meet certain criteria are permitted to take a partial credit against minimum wage obligations for tipped employees. Tipped employees include those engaged in jobs in which they regularly and customarily receive tips.

The tip credit was created by Congress in 1966, and adjustments occurred on December 28, 2021, when the 2021 Dual Jobs Final Rule went into effect. A federal court vacated portions of the final rule in October 2024, which effectively reinstated the original dual jobs regulation (29 C.F.R.531.56(e)). It recognizes that an employee may work in tipped and non-tipped occupations, and employers are only permitted to take the tip credit against minimum wage obligations for hours worked in the tipped occupation.

The FLSA mandates that a tipped worker must be paid at least $2.13 per hour. The FLSA tip credit can be equal to the difference between the direct (or cash) wage paid to the employee and the federal minimum wage. Only tips actually received by an employee count when making the determination of a tipped employee and applying the credit.

The FLSA also permits employees to “pool” or share tips with other eligible employees, although it doesn’t impose a limit on the amount or percentage of the contribution of each employee in a valid tip pool.

State law may differ from the federal FLSA standards. Review what tip laws apply in Hawaii.

When Were the Tip Laws Last Updated in Hawaii?

Hawaii’s tip laws were updated in October 2022, raising the tip credit.

Does Hawaii Have Tip Laws That Differ from Federal Tip Laws?

Yes, under the Hawaii Revised Statutes Section 387-2, the tip credit amount that employers may take in Hawaii differs from federal law. The credit only applies to employees who customarily receive over $20 per month in tips.

Who Holds the Ownership of Tips in Hawaii?

Under federal law, any gratuities paid to employees are their property. Employers are not permitted to require employees to hand in their tips, although they are allowed to count the tip toward the hourly rate.

What are the Rules for Distribution of Credit Card Processing Tips in Hawaii?

Federal law states that all tips paid by credit card must be issued to employees no later than the next regular payday, even if the employer is awaiting reimbursement from the financial provider.

What are the Tip Pooling Rules in Hawaii?

Hawaii law allows employers to create mandatory tip pools. However, employees must be informed about the pool in advance.

Who Can and Can’t Participate in Tip Pools in Hawaii?

Employers may not require tips to be shared with non-tipped employees unless they are not claiming a tip credit, instead paying the employee the full minimum wage.

Supervisors, managers, and owners/employers are never allowed to participate in tip pools.

Is there a Difference Between Tips and Service Charges in Hawaii?

Yes, a mandatory service charge is not considered a tip. Therefore, it would belong to the employer.

To be considered a tip instead of a service charge, a customer must give money voluntarily in an amount of their own choosing. The customer must also be able to determine who receives it, and it can’t be set by employer policy.

Can Employers Deduct Credit Card Fees from Tips in Hawaii?

There is no law restricting employers from deducting any credit card processing fees from employee tips.

Do Tips Count Toward the Minimum Wage in Hawaii?

Yes, the tip credit can count toward minimum wage. The state minimum wage is higher than the federal rate, so employers must adhere to the state rate.

Do Tips Factor Into Regular Rate Calculations for Overtime Pay in Hawaii?

Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage).

Are There Cities and Municipalities in Hawaii That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?

No, there are currently no cities or municipalities with differing tip or service charge rules.

What Are the Record-Keeping Requirements for Employers Regarding Tips in Hawaii?

Employers must keep detailed records of all tips reported by employees, including amounts and dates of service. If tip pooling is in effect, the record should also include the arrangements and the distribution of tips to eligible staff members.

What Options Do Employees Have for Remuneration if Their Tips are Withheld in Hawaii?

An employee may take legal action against an employer who violates state tip laws.

What are the Penalties for Employers for Not Complying with Hawaii Tip Laws?

Violating Hawaii tip laws can subject an employer to fines of between $500 and $1,000 per violation. They may also be responsible for any federally imposed penalties, back wages owed to the employee, legal fees, and other fees. Even failing to post information regarding tip laws can result in a fine of at least $100.

Managing the regulations associated with tips in Hawaii can be a challenge. The numerical clock prompt feature allows the employee to input their received tips at the end of the shift, and that information would be available for reporting and payroll processing.