What Is the Impact of Not Providing a Tip Credit Notice?
This week’s question comes from Tony, a restaurant owner. I read that restaurants should obtain a signed tip credit notice from all tipped employees. What is the impact of not providing a tip credit notice? Answer: Employers who do not provide a tip credit notice are not allowed to take the tip credit.
Minimum Wage for Tipped Employees May Be Lower
Current federal law requires most workers be paid a minimum wage of $7.25 per hour when an employee works forty hours or less in a week. For tipped employees, the minimum cash wage is $2.63 per hour as long as the employee receives enough tips to bring the hourly wage up to at least $7.25 per hour. Some states may have higher minimum wage rates that must be followed in that state. See our Minimum Wage Chart for further information.
Under FLSA, Notice Is Required to Take a Tip Credit
Under §3(m) of the Fair Labor Standards Act (FLSA), a tip credit is not allowed, “with respect to any tipped employee unless such employee has been informed by the employer of the provisions of [the tip credit].”
Employers Must Pay Full Minimum Wage
Employers who do not provide a tip notice and therefore are not allowed a tip credit must pay the full hourly minimum wage of $7.25 per hour the state minimum wage if it is higher than $7.25 per hour.
Contact Vision Payroll Today
Contact Vision Payroll today if you have further questions on the tip credit notice.
Restaurants Should Obtain a Signed Tip Credit Notice from All Tipped Employees
On April 5, 2011, the US Department of Labor (DOL)
issued a final rule
that affects employers who have tipped employees. The rule amended a Fair Labor Standards Act (FLSA) regulation. All employers are required to provide certain required information to all tipped employees in either oral or written form.
Signed Written Notice Would Document That Requirements Were Met
The DOL commented although a written notice is not required, “employers may wish to do so, since a physical document would, if the notice is adequate, permit employers to document that they have met the requirements in section 3(m) and the Department’s regulations to ‘inform’ tipped employees of the tip provision.”
NRA, CSRA, and NFIB Have Filed Suit over Tip Credit Regulation
The National Restaurant Association (NRA), Council of State Restaurant Associations (CSRA), and National Federation of Independent Business (NFIB) have filed suit over the new final rule. According to the NRA:
The Final Rule followed a notice of proposed rulemaking (NPRM) that the DOL published in 2008 that would have made only technical and non-substantive changes to the tip credit notice regulation. Nothing in the 2008 NPRM put the public on notice that the DOL was contemplating significant changes to the tip-credit notice requirements.
Vision Payroll Recommends Restaurants Implement a Written Notice Policy
The NRA has provided sample documents that restaurants and other who have hired tipped employees may download. Vision Payroll recommends that employers review the documents with legal counsel and implement a written notice policy as soon as practicable.
The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA2009-23. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). Because the letter was apparently never mailed after it was signed, the DOL under new Secretary Hilda L. Solis has decided to withdraw the letter for further consideration. Therefore, this letter may not be relied upon as a statement of agency policy. It is possible that a different conclusion may be reached when the Opinion Letter is reissued.
In this Opinion Letter, the DOL had redefined its definition of a tipped employee in situations in which an employee performs some duties related to a tip-producing occupation and some duties unrelated to a tip-producing occupation. Such employees may have dual jobs, such as a maintenance man in a hotel who also serves as a waiter and a single job with dual responsibilities such as “a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses.”
Different courts had issued conflicting rulings as to whether and to what extent unrelated duties could be performed in tip-producing occupations, how those duties were to be determined, and when the tip credit could be taken. The DOL had attempted to clarify in which situations the credit could be claimed. It had listed certain duties that it considered “core or supplemental for the appropriate tip-producing occupation.” It also wanted to clarify that some time spent performing unrelated duties may be exempt under a de minimis rule in the regulations.
State laws may provide rules that are more beneficial to the employee and must be followed. The DOL may come to a different conclusion when it reissues the Opinion Letter after further consideration. Contact Vision Payroll if you have questions about this Opinion Letter.
The US Department of Labor (DOL) recently issued Administrator signed Opinion Letter FLSA 2009-12. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA).
In this Opinion Letter, the DOL confirmed that barbacks who receive tips from the bartenders they support qualify as tipped employees and therefore are eligible for tip credits. A barback is described as an assistant to the bartender who works the same hours as a bartender and whose primary duty is to support the bartender.
In this case, the barbacks did not directly receive tips from customers but from the bartenders they supported. The tips were more than $30 per month. Tip splitting or pooling is allowed under the FLSA in certain circumstances and the tips are allocated to the employee who retains them. Since the barbacks are “engaged in an occupation in which [they] customarily and regularly [receive] more than $30 a month in tips” they qualify as “tipped employees”.
State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.