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Tipping Points

Posted on  | February 24, 2015   Bookmark and Share
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Tips can be complicated; here’s a brief refresher guide.

Recently the NJRA has received numerous questions about tips. Below is some information from the DOL’s Wage and Hour Fact Sheet.

* Tip Pool: The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers and service bartenders. A tip pool may not include employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs, and janitors.

* Dual Jobs: When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as someone employed both as a maintenance person and a server, the tip credit is available only for the hours spent by the employee in the tipped occupation. The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a server who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip-producing. However, where a tipped employee spends a substantial amount of time (in excess of 20% in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.

* Service Charge: A compulsory charge for service, for example 15% of the bill, is not a tip.  Such charges are part of the employer’s gross receipts.  Sums distributed to employees from service charges cannot be counted as tips received, but may be used to satisfy the employer’s minimum wage and overtime obligations under the FLSA. If any employee receives tips in addition to the compulsory service charge, those tips may be considered in determining whether the employee is a tipped employee and in the application of the tip credit.

* Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale; the employer may pay the employee the tip, minus that percentage. For example, where a credit card company charges an employer 3% on all sales charged to its credit service, the employer may pay the tipped employee 97% of the tips without violating the FLSA. However, this charge on the tip may not reduce the employee’s wage below the required.


I can’t encourage you enough to sign up for our Key Advocate program. This program puts you in direct contact with your legislator to express your concerns and issues about the pending “Mandatory Paid Leave” legislation. Please contact me directly at mhalvorsen@njra.org. There is no fee or charge to participate. We will provide you with talking points and a sample letter to send to your representatives. 


In the next few months, there will be some major changes in the AHCA.  We will try to keep you as updated as possible. Previously, the Departments of Labor, Health and Human Services and the Treasury explained that HRAs and employer payment plans cannot reimburse individual policies. On November 6, 2014, the Departments issued a set of FAQs which made clear that: An employer cannot offer employees cash to reimburse the purchase of an individual policy, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Such an arrangement may be subject to a $100/day excise tax per applicable employee. Visit us at NJRA.org for more details regarding AHCA. 


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