We have an an employee who works a salaried office/managerial position that would fit under the clerical exemption except that the salary is under the threshold for exemption. However, in this business the management rotates working tipped bartending positions for extra cash. If I add the employee's claimed tips to the salary, it is over the $455/week threshold. Should the tips be included when determining exemption? Should we pay overtime?

Pay the overtime!
JoeC

Pay the overtime. This person is non-exempt.

Or increase the salary to $455/week on a go forward basis (after paying overtime for past mistakes). But I agree with Joe that I like the employee's chances in court or administrative action much better then the employer's with the facts as stated. Tips are not salary. Unless you can get an opinion letter from federal DOL to the contrary, the employee can just claim that the law says what the law says and the employer is willfully failing to follow the law. I have never heard your specific argument being used before, but there are a lot of employers these days whom are getting slammed in court or administative action for failing to follow the strict rule of the White Collar exceptions.

First of all, it's the Administrative exemption, not the Clerical exemption.
http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17c_administrative.pdf

Secondly, tips cannot be used to meet the salary requirement for exempt status. The salary must be at least $455/week (federal but some states are higher) which amount is not subject to reduction
because of variations in the quality or quantity of the work performed.

http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_541/29CFR541.602.htm

Thanks for the quick replies! We have been paying overtime, but the owner asked me to look into it some more.