Tipped Employee Rights in Illinois

Basic rules

The "tip credit" system

Federal FLSA and Illinois law allow employers to pay tipped workers less than minimum wage in cash, as long as tips bring the total to minimum wage. This "tip credit" only works if:

• The employee is regularly and customarily engaged in work producing tips (usually defined as $30+/month in tips)
• The employee is notified of the tip credit in writing
• The employee's cash wage plus tips equal at least the full minimum wage
• The employer makes up any shortfall if tips are insufficient
• All tips are retained by the employee or pooled properly

Current tipped wage rates

Illinois statewide

• Tipped cash wage: $9.00/hour (60% of $15.00 minimum)
• Total must reach $15.00/hour with tips

Chicago (phasing out tip credit)

Chicago passed the One Fair Wage ordinance in 2023, phasing out the tipped wage by 2028. Rates update each July:

• July 2024: $11.02 cash base (plus tips to reach $16.20 total)
• July 2025: higher cash base
• July 2026, 2027: further increases
• By July 2028: Chicago tipped workers earn the full minimum wage regardless of tips — tips are additional

Cook County

Follows state rules (unlike Chicago's phaseout).

Federal

Federal FLSA allows a $2.13/hour tipped wage. Illinois state law is more protective, so Illinois rules apply to Illinois tipped workers.

Common violations

Failure to make up the difference

If an employee's tips don't bring total earnings to the full minimum wage, the employer must make up the difference in that pay period. Many employers don't — sometimes because the tips are inadequate only in specific slow periods, which the employer ignores.

Invalid tip pools

Tip pools are legal but have specific rules:

• Only tipped employees can be in the pool (with some exceptions for back-of-house since 2018)
• Managers, supervisors, and owners cannot participate in the pool
• Pool must be equitable and transparent

Tip pools that include managers or are grossly inequitable are unlawful.

Tip-sharing requirements that take tips from the employee

Tips belong to the employee who received them, subject to lawful pooling. An employer cannot force an employee to share tips with the employer, non-tipped employees (outside of lawful pools), or pay for shortages in the register.

"80/20 rule" violations (the sidework problem)

Tipped employees often do both tipped work (serving) and related non-tipped work (rolling silverware, stocking). Federal rules historically said non-tipped work must be under 20% of the workweek to qualify for tip credit. The current rule treats substantial non-tipped work as non-tipped and requires the full minimum wage for that time. Employers who pay tipped rate for hours of pure sidework are violating the rule.

Deducting credit card processing fees

An employer can deduct the actual credit card processing fee from a credit card tip (the small percentage the processor charges) but cannot deduct more than the actual fee. Excessive deductions are wage theft.

Denying overtime based on tipped rate

Overtime is based on the regular rate (which includes tips up to the minimum wage). Employers sometimes calculate overtime only on the tipped cash wage — a violation.

Service charges

"Service charges" (automatic 18% on parties of 6+, banquet service charges) are NOT tips. They belong to the employer, who can distribute them as they choose. If a service charge is given to the server, it's treated as a commission, not a tip — it counts toward the regular rate for overtime.

What employers must disclose

• The tipped wage rate
• That the employer is taking a tip credit
• The amount of the tip credit
• All tips received must be retained by the employee or pooled
• Tip credit will be lost if notice is not given

Failure to give notice means the employer loses the right to take the tip credit — the employee is owed the full minimum wage for all hours worked, plus tips.

Delivery drivers and vehicle expenses

Delivery drivers (pizza, food delivery) using their own vehicles have specific issues:

• Unreimbursed vehicle expenses (gas, wear, insurance) that bring effective pay below minimum wage are wage theft
• IRS business mileage rate (or actual expenses) is the typical baseline
• Flat per-delivery "reimbursements" that don't cover actual expenses are often inadequate

Major class actions against pizza chains have established driver-expense rules.

Documentation

If you suspect wage theft:

1. Track your hours, tips, and cash wage for each shift
2. Keep all pay stubs
3. Note any sidework done, training time, meeting time (often unpaid in violation)
4. Note tip pool composition and any managers participating
5. Save texts, messages, posted schedules, work rules
6. Note witnesses

Filing a wage claim

Illinois Department of Labor

312-793-2800. File a wage complaint.

U.S. Department of Labor — Wage and Hour Division

866-487-9243. Confidential; WHD can investigate without revealing who complained.

Chicago Office of Labor Standards

For Chicago-specific ordinance violations.

Private lawsuit

Both FLSA and Illinois Wage Payment and Collection Act (IWPCA) allow private suit with fee-shifting. FLSA collective actions (similar to class actions) are common for restaurant-wide violations. Plaintiffs'-side employment attorneys often take cases on contingency.

Remedies

• Unpaid wages
• Unpaid tips
• FLSA liquidated damages (equal to unpaid wages)
• IWPCA 5% per month penalty
• Attorney's fees and costs

Successful tipped-worker cases can result in damages several times the underpaid amount.

Immigration status

Wage protections apply regardless of immigration status. An undocumented tipped worker is entitled to minimum wage, overtime, and tip protections on the same terms as any other worker. Worker centers — including Latino Union of Chicago and Arise Chicago — specialize in wage claims for immigrant tipped workers.

Free help

• Raise the Floor Alliance — Chicago restaurant worker coalition
• Arise Chicago Worker Center — wage theft hotline, 773-263-5151
• Chicago Workers' Collaborative — multi-industry worker center
• Illinois Department of Labor — 312-793-2800
• Legal Aid Chicago — Employment — 312-341-1070