The recent budget bill contains big changes for businesses with tipped employees. The new law provides that an employer (including its managers and supervisors) may not keep any portion of its employees’ tips even if the employer does not take a tip credit, which is a maximum of $3.02 in Florida. Employers who violate this prohibition not only lose the tip credit but also now will be required to repay any improperly kept tips to their employees plus liquidated damages (double damages) based on the total amount of any tip credit taken plus any improperly kept tips. In addition, the Dept. of Labor can now assess violators a civil penalty of up to $1,100 for each violation.
The new law provides a good opportunity for employers to review their practices and make sure they are in compliance. Employers who utilize the tip credit should check that they provide proper notice of the tip credit to tipped employees and that any tip pooling arrangements only include tipped employees.
Employers who pay full minimum wage and do not take a tip credit should review their practices to make sure that no tips are kept by the employer or its managers and supervisors. Most importantly, these employers should review any service charges or other mandatory fees charged to customers to ensure that those fees do not fall within the definition of tips. Under the new law, if those types of fees are deemed to be tips, an employer could owe double the amount of the service fees to its tipped employees- regardless whether the employer takes a tip credit.
The new law is not all bad news for employers. The law does not address employers who do not use the tip credit from including non-tipped employees such as cooks, dishwashers and other back of the house employees in a tip pool, so long as no managers or supervisors are included. This is an issue both the Federal Courts and the U.S. DOL are presently considering. The DOL has signaled it may allow the participation of such “back of the house” employees in tip pools sometime soon.
Don’t forget to register for our 28th Annual Labor & Employment Law Seminar in Miami on April 27th or our Annual Labor & Employment Law Seminar in Tampa on May 18th!