Wages, overtime and tips — the two thresholds that give different answers

Most wage guidance for restaurants is federal, and Ohio is one of the states where that gets you into trouble. The rules that matter here are in the Ohio Constitution, not a statute a legislature can quietly amend — and two of them use different revenue thresholds to answer what looks like the same question.

Two thresholds, and they do not agree

This is the part worth reading twice.

The minimum wage figure lives in the constitution as $250,000, with the instruction that it “shall be increased each year beginning January 1, 2008 by the change in the consumer price index.”¹ Two decades of indexing is how it reached $405,000 for 2026.⁴ Below it, an employer pays the federal minimum instead.¹

Overtime works differently. Ohio requires one and one-half times the employee’s wage rate for hours worked in excess of forty in one workweek, and the definition of employer excludes one “whose annual gross volume of sales made for business done is less than one hundred fifty thousand dollars.”² That number has not moved and does not index.

So a restaurant doing $300,000 a year is under the minimum wage threshold and over the overtime threshold at the same time. It may pay the federal minimum, and it still owes time and a half after forty hours. Operators who learn one number and assume it governs everything get this exactly backwards.

Related: when a second location changes the rules covers the other thresholds that arrive with growth.

The tipped wage is a fraction, not a figure

Ohio does not set a tipped wage in dollars. The constitution says an employer may pay “less than, but not less than half, the minimum wage rate.”¹

So the tipped minimum is exactly half the regular minimum, and it moves on its own. At $11.00 in 2026 that is $5.50 — not because anyone chose $5.50, but because it is half.⁴ When the minimum indexes upward next January, the tipped rate follows without anyone announcing it separately.

And the condition attached to it is the whole obligation. You may pay the lower rate only if the employer is able to demonstrate that the employee receives tips that combined with the wages paid are equal to or greater than the minimum wage rate for all hours worked.¹

Three words there decide most disputes:

• “demonstrate” — the burden is yours, not the employee’s
• “combined” — the test is the total, not the tips alone
• “for all hours worked” — measured against the hours, not averaged over a flattering month

If the combination falls short in a workweek, you make up the difference. That is not a penalty; it is the deal the lower rate was offered under.

Nobody in management touches the tips

The federal rule is short and unusually absolute. An employer “may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”³

Read the last clause again. The prohibition is not a condition of taking the tip credit. Pay full minimum wage, take no credit at all, and a manager still may not take a share of the tip pool.

This is where owner-operators get caught honestly. In a small kitchen the person expediting on a busy Friday is often the owner or the general manager, and including them in the pool feels like fairness rather than a violation. It is still a violation.

The records are constitutional, and they are specific

Most operators think of wage records as an accounting habit. In Ohio they are a constitutional requirement with a named list.¹

An employer shall maintain a record of:

• name
• address
• occupation
• pay rate
• hours worked for each day worked
• each amount paid

for not less than three years following the last date the employee was employed — and that information “shall be provided without charge to an employee or person acting on behalf of an employee upon request.”¹

“Hours worked for each day worked” is the one that fails audits. A weekly total is not the record described. And “person acting on behalf of an employee” means the request may arrive from a lawyer or an advocate rather than from someone you employ.

These records are also what “demonstrate” means in the tipped provision. Without them you cannot make the showing the lower rate depends on.

What getting it wrong actually costs

This is where Ohio departs sharply from the federal baseline, and it is not widely known.

Where an employer is found to have violated the section, the employer shall within thirty days pay back wages, damages, and the employee’s costs and reasonable attorney’s fees — and damages are calculated as an additional two times the amount of the back wages.¹

That is three times the wages in total, plus their lawyer.

Two further provisions worth knowing:

Payment is not stayed pending appeal.¹ Appealing does not pause the obligation to pay.

Retaliation carries its own floor. No employer may discharge, discriminate or retaliate against an employee for exercising a right under the section — or against any person for providing assistance to an employee. Damages for an anti-retaliation violation are set to compensate and deter, but not less than one hundred fifty dollars for each day that the violation continued.¹

The section closes with the instruction that it “shall be liberally construed in favor of its purposes.”¹ That is a drafting choice about who gets the benefit of an ambiguity, and it is not you.

The narrow family exemption

The section does not apply to employees of a solely family owned and operated business who are family members of an owner.¹

Read it precisely. It exempts family members, not everyone who works for a family-owned business. A family restaurant with three cousins and nine other employees is exempt as to the cousins only.

One thing we are not going to give you a bright line on

How much non-tipped side work a tipped employee may do before the tip credit stops applying to that time is a federal question, and the rule has been rewritten and litigated repeatedly in recent years.

We are not printing a percentage or a time limit here, because any figure we gave you would be a snapshot of a moving fight and you would plan a rota around it. If your servers do significant opening, closing or prep work off the floor, that is a question for an employment lawyer, and it is worth asking before it is worth defending.

Before your first payroll

1. Work out which side of both thresholds you are on — they are different numbers and only one of them indexes.
2. If you take the tipped rate, build the record that demonstrates it, by workweek and by employee.
3. Take management out of the tip pool, whether or not you take a tip credit.
4. Record hours by day, not by week, and keep it three years past the last day worked.
5. Ask about side work if your servers do meaningful non-tipped work.

Wage and hour is the most common serious exposure a restaurant has that is not a slip or a fire — see insurance for the employment practices side of it. Figures change every January, and the federal layer moves independently of the state one. Confirm with the Division of Industrial Compliance or an employment lawyer before you rely on it.