b'TipsWho, What, Why . . . Who does it apply to: Employers who take the tip credit againstcredit amount. Technically, this would be a violation because wages of some or all of their employees. employees should only be paid the tip credit amount while they can be earning tips. The DOL has an informal rule that prep time What is the tip credit: Employees who earn tips may be paidis not an issue as long as it does not exceed 20 percent of the a lower hourly rate than the standard minimum wage on theemployees shift. Employers must be careful though because theory that they make it up in tips. Currently, employers mayany time during a shift may count toward this limit.It is very takeacreditagainstminimumwagereducingthetippedeasy to run afoul of this rule.employees pay to $2.13 per hour (as opposed to $7.25). As long as the tipped employee earns at least $5.12 per hour inWhohastheburdenofproof:Employersneedtokeepin tips, the employer has no further obligation. If the employee fallsmind that the burden to prove tips were handled properly is on short of this mark during any week, however, the employer isthem. Recordkeeping is, therefore, very important. After all, the obligated to make up the difference. consequence of losing the tip credit is to go back and make the employees whole at the full minimum wage rate.Who does the credit apply to: Well, tipped employees, of course. A tipped employee is a person who receives more than $20 perWhat do I have to tell the tipped employees: Tipped employees month from tips, retains all the tips (except for tips shared in amustbeplacedonnoticeoftheiremployerstipsystem, legitimate pool), and is employed in a job that customarily andincluding the time and manner in which tips are paid. This notice regularly receives tips (not just holidays or special occasions).does not have to be in writing, but it is recommended so that This includes employees like a busboy who may not receive theemployers can prove to the DOL that the employee was on tip directly but is awarded the tip as part of a legitimate tip pool.notice if it becomes an issue. Employees must also be placed Tipped employees typically include servers, bellhops, counteron notice of any tip pool and its manner of tabulation.people who serve, busboys, service bartenders, and perhaps hostesses, seaters, and greeters. How do tip pools work: A tip pool is simply the pooling of tips received from the service of a customer at a meal for the service What is a tip:A tip is a monetary payment by a customer thatstaff. While the check is usually paid to the server and customers is totally discretionary.It does not include service charges, e.g.,attributethetiptotheirservice,therearemanyemployees a restaurant that automatically taps your bill for a certain amountinvolvedintheprocessincludinghostesses,busboys,and on top of the food to pay for the service you receive. That said,the like. To be legal, the pool must pay out to only those who the Department of Labor (DOL) does not consider the automaticcustomarily and regularly receive tips (see above).The tip pool gratuity charged by some restaurants for tables of six or morecannot include the portion of the servers tips that are required to be a service charge as long as the employee receives the tip. to cover the tip credit or take away more than what is customary and reasonable in that locale. The DOL takes the position that How does prep time count: Prep time is dangerous for employers.thecustomaryandreasonabledeductioncannotexceed15 Many restaurant owners, for example, have employees come inpercent, but there may be special cases. If instituted by the 30 minutes to an hour before their shift to set up tables andstaff itself, however, a tip pool taken can be any amount.All preptherestaurant.Duringthistimetheypayonlythetipparticipating employees must have advance notice of a tip pool.33'