On June 28, Rhode Island Governor Daniel McKee signed new tip protection legislation. The statute prohibits employers of tipped employees from withholding tips, creates new requirements for tip pools, and establishes requirements for tip deductions for credit card processing.
Existing Law Regarding Tipped Employees
Rhode Island allows employers to take a tip credit against the general minimum wage, currently $12.25 per hour. Employers can pay tipped employees a wage of at least $3.89 per hour, as long as tips for the week make up the difference ($8.36 per hour).
Employers are required to provide substantial proof that the tips each employee receives each week bring their earnings to at least the minimum wage. That substantial evidence can be a form signed by the employee, listing the tips received during the week.
These requirements were not changed by the tip protection statute and remain in effect.
the New Statute
The new tip protection statute applies to tipped employees, who are all employees “engaged in an occupation in which the employee customarily and regularly” receives more than $30 per month in tips. The law applies to all employers in Rhode Island.
The tip protection statute makes it clear that tips are the sole property of the tipped employee. Employers cannot take any part of an employee’s tip. The only exception is deductions for credit card processing fees, which may be taken from an employee’s tips if the employer notifies the employee of the deduction and the amount does not bring the employee below minimum wage.
Tips must be paid no later than normal payday. Tips cannot be withheld because the employer is awaiting disbursement from a credit card company.
The statute outlines the requirements for a valid tip pool. A tip pool may be established among employees “who habitually and regularly receive tips,” provided the employer (1) notifies employees of the tip pool contribution amounts, (2) only obtains a tip credit for the amount actually received by each employee, and (3) does not take any part of the tips for himself, except for credit card processing fees.
A tip pool may include employees who are not “tipped employees,” but only if the employer pays the full minimum wage and does not accept any tip credits, and exempt employees are not included in the tip pool. For example, a restaurant could have a tipping pool that includes all of its service staff and pay them $3.89 per hour, but if it wanted to include house employees such as cooks, it would have to pay the full minimum wage. of $12.25.
Service charges, that is, mandatory fees charged by an employer to an employer or customer, belong to the employer, not the employee. If an employer chooses to distribute money from a service charge to employees, that amount can be credited against minimum wage obligations, such as the tip credit.
Service charge distributions to employees do not count as tips when determining whether an employee earns $30 per month in tips to be considered a tipped employee, although any tips received in excess of the service charge do count in that calculation.
The statute entered into force on June 28, immediately after it was signed. Employers in Rhode Island with tipped employees should review their policies and practices to ensure that they do not withhold any portion of employee tips, that tip distribution arrangements meet the requirements of the statute, and that employees are properly notified about the distribution of tips and credit. card deductions.
Stephen Melnick is an attorney for Littler in Boston. Gregory Henninger is a Littler Attorney in Providence, RI © 2022. All rights reserved. Reprinted with permission.
Source: www.shrm.org