Vermont Tip Laws and Requirements
Vermont's tip laws, updated in January 2025, differ from federal FLSA regulations by allowing employers to take a tip credit of up to 50% of the state’s higher minimum wage for employees earning at least $120 monthly in tips, requiring tip earnings to be reported to employees, while federal law mandates a $2.13 hourly wage minimum for tipped workers, permits tip pooling without contribution limits, and restricts tip credits to hours worked in tipped occupations.
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 Vermont.
When Were the Tip Laws Last Updated in Vermont?
The tip laws were updated in Vermont in January of 2025.
Does Vermont Have Tip Laws That Differ from Federal Tip Laws?
Yes, Vermont has tip laws that differ slightly from federal laws. Employers are permitted to take a tip credit of up to 50% of the minimum wage on employees earning at least $120 per month in tips regularly, and the state has a higher minimum wage than the federal rate. It is also a requirement to report tip earnings to eligible employees.
Who Holds the Ownership of Tips in Vermont?
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 Vermont?
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 Vermont?
Tip pools are allowed in Vermont, but the tips must be redistributed within the same pay period.
Who Can and Can’t Participate in Tip Pools in Vermont?
Only tipped employees may participate. Supervisors, managers, owners, and non-tipped employees may not.
Is there a Difference Between Tips and Service Charges in Vermont?
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 Vermont?
Yes, employers may deduct credit card fees from tips as long as doing so doesn’t take the hourly rate below the statewide minimum.
Do Tips Count Toward the Minimum Wage in Vermont?
Yes, tips may count toward the minimum wage in Vermont as long as the employer adheres to the required tip credit vs. cash wage percentage.
Do Tips Factor Into Regular Rate Calculations for Overtime Pay in Vermont?
Yes, tips factor into rate calculations for overtime pay. Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage), and employers may take a tip credit as long as it is calculated on the full minimum hourly wage.
Are There Cities and Municipalities in Vermont That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?
No, there are no cities or municipalities with differing laws.
What Are the Record-Keeping Requirements for Employers Regarding Tips in Vermont?
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 Vermont?
An employee may take legal action against an employer who violates state tip laws.
What are the Penalties for Employers for Not Complying with Vermont Tip Laws?
Violating Vermont tip laws can subject an employer to a fine of up to $100 per violation. Employees may also be permitted to recover the unpaid wages in damages.
Related
Montana Tip Laws and Requirements
Montana's tip laws, updated in 2021, differ from federal FLSA regulations by prohibiting employers from using a tip credit and requiring payment of the full state minimum wage—which is higher than the federal rate—to tipped employees, who retain ownership of their gratuities.
South Carolina Tip Laws and Requirements
South Carolina adheres to federal Fair Labor Standards Act (FLSA) tip laws, which regulate tipped employees' wages, allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, mandate a minimum cash wage of $2.13 per hour for tipped workers, permit tip pooling among eligible employees without limits on contributions, and recognize that tips are the property of employees, with the state's tip laws last updated in September 2021 and no deviations from federal standards.
Minnesota Tip Laws and Requirements
Minnesota's tip laws, updated in August 2024, differ from federal FLSA regulations by prohibiting employers from taking a tip credit—requiring tipped employees to receive the full state minimum wage plus tips—and affirm that tips are the sole property of employees, with employers unable to claim or require sharing beyond valid tip pooling among eligible staff.
Pennsylvania Tip Laws and Requirements
Pennsylvania's tip laws, updated in August 2022, align with federal Fair Labor Standards Act regulations by allowing employers to take a tip credit against minimum wage for tipped employees who earn at least $135 per month in tips, requiring a base hourly wage of at least $2.83, while recognizing that tips are the property of employees and that tip pooling is permitted without federal limits on contribution amounts.
New Mexico Tip Laws and Requirements
New Mexico's tip laws, updated in 2023 to reflect a higher statewide minimum wage, allow employers to take a tip credit differing from the federal standard under the FLSA—which mandates a $2.13 hourly wage for tipped employees and permits tip pooling—but require adherence to state-specific rates and regulations regarding tip ownership and credit application, especially considering the reinstated original dual jobs rule limiting tip credit to hours worked in tipped occupations.
New Hampshire Tip Laws and Requirements
New Hampshire's tip laws, updated in September 2023, differ from federal FLSA regulations by requiring employers to pay tipped employees a base wage of at least 45% of the minimum wage plus at least $30 per week in tips, while federal law allows employers to take a tip credit against minimum wage obligations only for hours worked in tipped occupations and mandates a minimum cash wage of $2.13 per hour.