Categories: Payroll, Policy & Regulation,
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Think that Tipping is Just a Matter of Etiquette? Wrong. For Employers, it’s the Law.

A New York court recently ruled in a case regarding tip sharing between coffee baristas and their supervisors, bringing clarity for the state’s hospitality industry on how to compensate employees. In this case, the state court found that coffee baristas and their supervisors are both part time employees who serve customers and therefore, the baristas must share tips with their supervisors. However, the assistant managers are full time employees with benefits like paid holidays, vacations, and bonus opportunities and baristas do not have to share tips with the assistant managers.

This case brings to light wage and hour laws, which differ between federal and state requirements. Additionally, state rules vary from state to state. However, there are a few key rules to follow under the federal Fair Labor Standards Act (FLSA).

tipjarDefinition of a “tipped employee” is any employee “who customarily and regularly receives more than $30 per month in tips.”

Tips are the property of the employee. The employer may only use tips as a credit against its minimum wage obligation to the employee.

As outlined on the FLSA Tipped Employees Fact Sheet, employers must provide oral or written notice to tipped employees, before they can use the tip credit, on the following:

• the wage (must be at least $2.13 per hour);
• the additional amount claimed by the employer as a tip credit (cannot exceed $5.12, which, added to the $2.13/hr wage totals the current minimum wage of $7.25);
• that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
• that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
• that the tip credit will not apply unless the employee has been informed of these tip credit provisions.


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