Tip Compliance

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In what states can one withhold Credit Card discount rate from servers, and will this harm my Tip Credit?

By John Marshall

The US Department of labor states the following:

Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee's wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.

dol.gov/esa/regs/compliance/whd/whdfs15.htm

This does not mean that all states abide by these standards. There are several states where the legality of these deductions is unclear, and in which employers may stand to lose the ability to elect the Tip Credit if taken.

www.littler.com/presspublications/index.cfm

These states are New Jersey, Minnesota, New Mexico and North Dakoda. Futhermore, the states of Delaware, Hawaii, Idaho and Wisconsin have no language to aid in determining the appropriateness of such deductions. In all cases, checking with your state restaurant association is a good first step.

Finally, Massachusetts appears to make clear that this practice is unacceptable altogether.

www.uschamber.com/sb/business/P98/P98_05_4045_MA.asp