The Washington Department of Labor and Industries (L&I) clarified existing policies on Tips, Gratuities, and Service Charges. Here are 5 points to review in your policies that apply to Tipped Employees:
#1. All tips belong to the employee.
- Existing policy: All tips must go to the tipped employee and employers cannot take a “tip credit” toward the employee’s minimum wage (tip pooling is permitted).
- Clarification: The employer may have a policy prohibiting the employee from accepting tips or gratuities, but if a customer leaves a tip “in defiance of a policy” the employee must be permitted to keep the tip.
#2. Exempt individuals may not be part of a tip pool.
- Existing policy: Tip pooling can be mandatory however, per Federal and State guidelines, Managers and Supervisors may not be included in a tip pool.
- Clarification: The interpretation of “Manager and Supervisor” now includes any individual that is “Exempt” under RCW 49.46.010(3)(c).
- Note: Exempt employees can accept tips, but only for services that they “directly provide” to customers and they may not participate in a tip pool.
Continue reading Clarification for Washington Employers with 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
Earlier we reported that DC had passed legislation (the “Fair Shot Minimum Wage Amendment Act of 2016”, DC-B712) to increase its minimum wage for hourly employees. (Note: this increase is pending Congressional approval).
Included with this increase in hourly minimum wage is an increase in minimum wage for tipped employees. If approved by Congress, the minimum wage for tipped employees will increase from $2.77 per hour as follows:
- July 1, 2017 — $3.33 per hour;
- July 1, 2018 — $3.89 per hour;
- July 1, 2019 — $4.45 per hour; and
- July 1, 2020 — $5.00 per hour.
This new legislation was approved by the DC mayor on June 29, 2016 and was transmitted to Congress on July 8, 2016. The projected effective date of this new law is November 15, 2016 – assuming the new law is approved by Congress.
Tip Pooling: A business’s practice of dividing customer tips among the staff.
While it is clear that management employees are not permitted to participate in a tip pool, there has been an ongoing debate as to whether the tip pool can be extended to those working in the “back of the house” (i.e. dishwashers, cooks, chefs, janitors, etc.) or if the pool is limited only to those working in the “front of the house” (i.e. servers, bartenders, etc.)
In 2011, the US Department of Labor issued a rule stating that stating that tips are the sole property of the tipped employee and only those employees who customarily and regularly receive tips (like waiters, waitresses, bellhops, counter personnel, bussers, and bartenders) can participate in a tip pool. In other words, “back of the house” employees were excluded from the tip pool because they do not customarily and regularly receive tips.
After this rule was published (in July 2012), several West Coast restaurant and lodging associations filed a lawsuit (Oregon Rest. & Lodging Association v. Perez) against the DOL arguing that the rule was invalid because the DOL had exceeded its statutory authority by issuing that rule. In 2013, a federal district court invalidated the DOL’s new tip-pooling regulations (thereby allowing “back of the house” employees to be included in the tip pool).
The DOL appealed the district court’s ruling and, earlier this year, the 9th Circuit issued its decision and held that the DOL’s tip pooling rule was valid.
What does this mean for employers?
For those employers who have included “back of the house” employees in a tip pool, they must rethink how their tip pool operates, as these employees can no longer be included in the traditional tip pool. Some alternatives:
- Exclude the “back of the house” employees from the tip pool;
- Include a separate line on guest checks for “back of the house” employees and have a separate tip pool for those employees;
- Eliminate the mandatory tip pool for all employees;
- Eliminate tipping altogether and charge all customers a mandatory service fee.