From the American Hotel & Lodging Association (AH&LA):
Under a U.S. Department of Labor rule, which went into effect May 5, 2011, employers must comply with specific procedures if they seek to claim a tip credit for wages paid to employees who receive tips in addition to a cash wage.
How it Works
Every employee for whom a tip credit is applied as part of his or her wages, must be notified of the following:
- The cash wage being paid to him/her, which must be at least $2.13 an hour (or higher depending on state law)
- The tip credit amount, which may not be greater than the difference between the minimum wage and the cash wage or the actual amount of tips received by the employee up to $5.12 per hour (or less depending on state law)
- All tips must be retained by the employee, except in the case of a valid tip-pooling arrangement
- The credit will not apply to any employee who has not been informed of this information
Although the rule states that employers do not necessarily need to provide this information in writing, it strongly advises employers to do so in case they are called upon to prove they have complied.
Questions? The Department of Labor has produced a fact sheet on the new rules.
Employers must also comply with state laws that apply to tipped employees in addition to federal laws. Wages for tipped employees in specific states can be found here.
UPDATE: Fischer & Phillips LLP has posted an article in their laborlawyers.com blog regarding interpretations of the new Tip Credit requirements, including general principles, informing employees of the law’s provisions, no limits on tip pooling amounts, the chances for increased scrutiny of tipped-employee pay practices and additional Department of Labor news. Read the article here.