Tag Archives: Tip Credit

New Tip Credit Rules – Give credit where credit is due

The Department of Labor’s (DOL) Wage and Hour Division recently published a Field Assistance Bulletin to notify employers that they have updated the Division’s Field Operations Handbook concerning a change to tipped employees in Dual Jobs.

Prior to November 8, 2018 the DOL Guidance stated that employers were prohibited from taking tip credit for work time if the employee spent more than 20% of that time performing non-tipped related duties during the workweek (referred to as the 80/20 Rule).

The DOL recognized that this was confusing for employers and they have rescinded the 20% rule so that now employers can apply tip credit to the time an employee performs tipped jobs even if that job includes some non-tipped tasks (such as washing a few dishes) during or immediately before or after performing tipped duties. Continue reading New Tip Credit Rules – Give credit where credit is due

Federal Tip Credit and Tip Pooling Basics

The Fair Labor Standards Act (FLSA) outlines federal tip credit and tip pooling provisions.

What is tip credit and tip pooling under Federal Law?

  • Under a valid tip credit policy, employers are able to pay tipped employees an hourly rate that is less than minimum wage – provided that the tipped employee’s hourly wage plus tips equals or exceeds the required minimum wage.
  • A tip pooling agreement requires tipped employees to deposit a portion of their customer tips into a common “tip pool” to be shared with other employees. A valid Tip Pooling arrangement must meet all the requirements of the FLSA provisions (and any state requirements) for tipped employees.

Continue reading Federal Tip Credit and Tip Pooling Basics

REMINDER: Massachusetts Employers Have New Requirements For Tipped Employees

As we reported earlier (in NEW LAW: Massachusetts to Increase Minimum Wage with Grand Bargain), the Massachusetts’ “Grand Bargain” legislation increased the state minimum wage and the “service  rate” (tip credit) that tipped employees could receive.  Effective January 1, 2019, the minimum wage in Massachusetts increased to $12 per hour and the “service rate” increased to $4.35 per hour.

Under Massachusetts law, employees who make at least $20 per month in tips can be paid a “service rate” provided that (1) they are notified in writing that they will be paid the service rate and (2) the employee’s total wages (the service rate plus all tips earned in the shift) equal or exceed minimum wage. Continue reading REMINDER: Massachusetts Employers Have New Requirements For Tipped Employees

NEW LAW – Washington DC Elimination of Tip Credit Repealed

Back in June 2018, Washington DC voters passed Initiative 77, which was intended to gradually eliminate the “tipped employee minimum wage” (or tip credit) by 2026.  That Initiative has officially been repealed.

Earlier this month, the D.C. Council passed a measure to overturn and repeal Initiative 77.  This means that employers in Washington DC will be able to continue paying their tipped employees a lower minimum wage than regular hourly workers.

Currently the tipped minimum wage in Washington DC is $3.89 per hour.  This minimum wage is slated to increase as follows: Continue reading NEW LAW – Washington DC Elimination of Tip Credit Repealed

NEW LAW – Maine Reinstates Tip Credit For Tipped Workers

In November of 2016, Maine voters passed a referendum that increased Maine’s minimum wage, but also eliminated the tip credit for tipped workers.  Recently, Maine Governor Paul LePage signed LD 673 into law.  This new law restores the tip credit for Maine businesses that employ servers and other workers who receive tips.

The new law does not take immediate effect.  Instead, the new law takes effect 90 days after the Legislature adjourns (August 2, 2017), which means that the law will take effect on Wednesday, November 1, 2017.

When the new law goes into effect, employers will once again be able to pay tipped employees half the state’s minimum wage.  However, employers will still be required to make up the difference in tipped employee pay when their weekly tips are not equal to what they would earn under the minimum wage.

Connecticut Employers – Do You Consider Your Delivery Drivers Eligible for a “Tip Credit”?

If you do, you must cease this practice immediately. In a recent case (Amaral Brothers, Inc. v. Department of Labor), the Connecticut Supreme Court found that employers cannot take advantage of a “tip credit” for delivery drivers in order to meet the state minimum wage.

Under Connecticut wage and hour law (Conn. Gen. Stat. § 31-60(b)), a tip credit may be taken for “persons, other than bartenders, who are employed in the hotel and restaurant industry . . . who customarily and regularly receive gratuities.” This law allows certain businesses (e.g. hotels and restaurants) to pay their “service employees” an hourly rate below the state minimum wage and “credit” a portion of the tips earned by the employee towards the required minimum wage.

In this case, a group of pizza delivery drivers had filed a class action lawsuit against their employer claiming that the employer improperly took a “tip credit” from their wages and, as a result, failed to pay them minimum wage in accordance with the law.

The employer, on the other hand, claimed that the employees were “service employees” and, as a result, eligible for the tip credit.

Connecticut law defines “service employees” as “any employee whose duties relate solely to the serving of food and/or beverages to patrons seated at tables or booths, and to the performance of duties incidental to such service, and who customarily receive gratuities.” The employer argued that delivery drivers were service employees because their job duties were similar to that of a waiter carrying food to a customer at a table.

The Connecticut Supreme Court disagreed. Instead, the Court found that delivery drivers do not fall within the scope of the tip credit because “the legislature did not intend that employees such as delivery drivers, who have the potential to earn gratuities during only a small portion of their workday, would be subject to a reduction in their minimum wage with respect to time spent traveling to a customer’s home and other duties for which they do not earn gratuities.”

Take home for employers

For those employers who employ delivery drivers, this ruling may impact how those employees are paid. If your company currently applies a “tip credit” to these employees, that practice must stop immediately. In addition, to the extent that your waitstaff also perform delivery services, the time spent performing those services is not eligible for a tip credit.