Oklahoma Tip Laws: An Employer’s Guide to Compliance and Fair Labor

 

Running a restaurant in Oklahoma means keeping a close eye on wage and tip compliance, especially with tipped employees. While the state follows Fair Labor Standards Act (FLSA) regulations, the rules around tip credits, service charges, and record-keeping can still trip up well-meaning employers. If you’re not careful, what seems like a minor payroll oversight can quickly become a legal headache for your business.

What counts as a tip in Oklahoma?

A tip is any extra money a customer voluntarily gives to an employee as a reward for good service. It can take several forms. The most common is cash left on the table by customers.

But tips can also come through credit or debit card payments, gift cards, or electronic tipping tools built into your POS system. If tips are collected and shared through a tip pool, they’re still considered part of the individual employees’ tips, as long as the pool follows legal rules.

Under state law, employers cannot keep any portion of their employees’ tips, and they must be careful not to confuse service charges or administrative fees with actual tips.

What’s a service charge?

A service charge is a mandatory fee that a restaurant adds to a customer’s bill. This fee is not the same as a tip, even though it might look like one on the receipt.

Tips are left at the customer’s discretion, and they always belong to the employee. On the other hand, service charges are set by the business. Common examples include a 20% service fee for large parties, banquet event charges, or room service fees in hotel restaurants. Because these are not voluntary, they are treated as part of the business’s revenue, not employees’ tips.

It’s important to know the difference when it comes to taxes. Tips must be reported by the employee and are subject to FICA taxes (Social Security and Medicare). Service charges, however, are treated as regular wages. This means employers must handle tax withholding, just like with hourly pay.

If you decide to share any portion of a service charge with your team, it must go through payroll. It cannot be counted toward a tip credit, and it doesn’t count as part of a tip pool under tip regulations.

To avoid confusion or potential disputes, label these fees clearly. Use terms like “Service Charge” or “Admin Fee,” not “Gratuity.” In this way, your customers know the difference. It also protects your team from pay issues or wage law violations.

Who qualifies as a tipped employee?

To be legally classified as a tipped employee in Oklahoma, the worker must regularly earn at least $30 per month in tips, following federal law. Typical tipped roles include servers, bartenders, bussers, hotel bell staff, and baristas. Basically, it’s anyone who frequently interacts with customers and receives tips directly. These employees often depend on tips to supplement their base pay.

However, if a worker doesn’t earn $30 in tips in a given month, or their role doesn’t involve regular customer-facing service, they don’t qualify for the tip credit. In that case, you must pay them the full minimum wage for every hour worked during that time.

Oklahoma allows a tip credit, which is a legal allowance that lets employers pay tipped employees less than the full minimum wage, as long as the employee’s tips make up the difference. To use the tip credit, employers must meet certain conditions.

First, the employee must qualify as a tipped employee, meaning they reach the $30 threshold each month. Next, their total earnings (cash wage + tips) must equal or exceed the minimum wage for each hour worked. Lastly, employers must give a written tip credit notice before applying for it.

Tipped and minimum wage structure

Oklahoma’s minimum wage follows the federal standard of $7.25 per hour. For tipped employees, the state also allows employers to pay a cash wage as low as $2.13 per hour, as long as the worker earns enough in tips to make up the difference. This gap ($5.12) is called the tip credit.

To stay compliant, you must make sure that each tipped employee’s total pay (cash wage + tips) adds up to at least the minimum. For example, if a server works 40 hours a week and you pay them $2.13 per hour, that equals $85.20 in cash wages.

To reach the legal minimum, they need to earn at least $204.80 in tips, because 40 × $7.25 = $290 total pay. If the employee doesn’t earn enough tips to hit that mark, you’re legally required to make up the difference.

Tip pool and ownership rules

In Oklahoma, tips are the property of the employee who earns them, not the restaurant. Whether a customer leaves a cash tip or adds it on a credit card, that money legally belongs to the worker who provided the service. As the employer, you can’t take or keep any part of an employee’s tips.

That said, tip pooling is allowed in Oklahoma. A tip pool lets staff combine their tips to be shared among a group. But you have to follow strict restaurant tip pooling laws. You can only include employees who “customarily and regularly receive tips,” such as servers, bussers, and bartenders. Managers and supervisors can’t join, even if they help serve tables.

Set up a legal tip pool structure by explaining the rules clearly to your team and documenting how the money is split. Make sure that 100% of pooled tips go back to eligible employees. Nothing should be kept by the business or distributed to ineligible staff.

If you ever want to include BOH staff in the tip pool, you mustn’t be using the tip credit. You must pay everyone the full minimum wage.

Credit card tips and processing fees

Credit card tips are still owned by the employee, but Oklahoma and federal law allow employers to deduct the processing fee. You can only deduct the actual fee charged by your payment processor.

If your credit card processor charges a 2.5% fee, and a server earns $100 in credit card tips, you can deduct $2.50 from that total. But you can’t round up or charge more than your actual cost. And no matter what, the employee’s total pay must not fall below the minimum wage.

Itemize credit card fee deductions on each employee’s pay stub or tip report. That way, your team can clearly see how much was withheld and why. Take note that you cannot deduct any amount from cash tips as well. These are considered immediate earnings and are owned fully by the employee.

Overtime pay rules for tipped employees

Overtime for tipped employees must follow federal wage laws, which require overtime to be paid at 1.5× the full minimum wage and not the lower tipped cash wage. Since the minimum wage is $7.25 per hour, the overtime rate in Oklahoma is $10.88 per hour.

Employers can still take a tip credit, but only if the cash wage and tips reach at least $10.88 per hour for every overtime hour worked. Let’s say a server works 45 hours in one week and earns $200 in tips. Their regular 40 hours must still meet the $7.25 per hour rule, and the five overtime hours must be paid at $10.88 per hour.

That means their total earnings for the week must reach at least $508.25. If the server doesn’t earn enough in tips, the employer is legally required to cover the missing amount.

Required notices and record-keeping

When using the tip credit, you need to give each tipped employee a written notice before their first shift. It needs to state the cash wage you’ll pay the employee, which is usually $2.13 per hour. Second, it should list the tip credit you plan to claim (up to $5.12 per hour) to help you meet the minimum wage of $7.25.

The notice must also clearly explain that all tips belong to the employee, not the employer. Additionally, it needs to state that the tip credit cannot be more than the actual tips earned and must make it clear that this disclosure is required by law before employment begins.

The best practice is to have your employee sign and date the notice and keep a copy on file. That way, if there’s ever a wage dispute or Department of Labor audit, you’re covered.

As for record-keeping, the FLSA requires you to keep detailed payroll and tip records for at least 3 years. Just to be sure, you can hold records for more than that to protect your business. You’ll need to track hours worked, cash wages paid, tips earned, and signed tip credit notices for each tipped employee. Documenting everything helps prove that you followed wage laws and stayed compliant with all tip regulations.

Keep wages and tips A-OK

If you’re feeling unsure or overwhelmed with Oklahoma’s wage and tip laws, you’re not alone. Many restaurant owners struggle with understanding the fine print around tip credits, service charges, and employee classifications. But with the right tools and preparation, it’s completely manageable.

Keep up with Oklahoma’s tip laws with 7shifts, giving you built-in tools to track tip credits and monitor overtime pay. With our restaurant payroll software, you’re assured that all tipped employees meet minimum wage requirements.