No. 31149 (Amendment): R610-1-4. Tips, Gratuities, and Commissions

DAR File No.: 31149
Filed: 04/14/2008, 02:24
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this amendment is to clarify standards for payment of minimum wage in situations involving tipped employees and tip pooling.

Summary of the rule or change:

The amendment clarifies the definition of a "tip" and "tipped employees" and removes redundant references to "gratuities". The amendment also clarifies that employers can mandate tip pooling if prior written notice is provided to employees. Finally, the amendment reorders existing rule sections.

State statutory or constitutional authorization for this rule:

Sections 34-23-101 et seq., 34-28-1 et seq., 34-40-101 et seq., and 63-46B-1 et seq.

Anticipated cost or savings to:

the state budget:

The amendment may minimally increase the Division of Antidiscrimination and Labor's enforcement costs due to the requirement that employers notify employees in writing of any mandatory tip pooling arrangement. State government does not claim any tip credit against minimum wage. Consequently, the substance of this amendment will not impose any additional compliance costs or result in any savings to the State of Utah in its capacity as an employer.

local governments:

Local governments do not claim any tip credit against minimum wage. Consequently, the substance of this rule amendment will not result in any additional compliance costs for local government and will not result in any costs or savings to local governments.

small businesses and persons other than businesses:

The amendment requires that employers notify employees in writing of any tip pooling arrangement. This written notice does not require any formality and can be done in a brief written statement. The commission estimates that writing and distributing the required notice will require less than one hour of time for the relatively small number of employers that use tip pooling arrangements.

Compliance costs for affected persons:

Compliance costs for employees covered by the proposed rule are de minimis. At most, as discussed in "small businesses" above, it will require approximately one hour for those employers using tip pooling arrangements to comply with the rules requirements. Other employers will not incur any compliance costs.

Comments by the department head on the fiscal impact the rule may have on businesses:

By clarifying tip rules for employers, employees, and the Labor Commission itself, the amendment is expected to simplify businesses' compliance with minimum wage requirements as those requirements are affected by tip income. While the amendment does add a requirement that employers notify employees in writing of any mandatory tip pooling arrangement, the commission believes that this requirement is easily complied with and may benefit businesses by bringing additional clarity to the terms of compensation for tipped employees. Sherrie Hayashi, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Labor Commission
Antidiscrimination and Labor, Labor
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY UT 84111-2316

Direct questions regarding this rule to:

Heather Morrison or Brent Asay at the above address, by phone at 801-530-6921 or 801-530-6802, by FAX at 801-530-7601 or 801-530-7601, or by Internet E-mail at [e-mail] or [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/02/2008

This rule may become effective on:

06/09/2008

Authorized by:

Sherrie Hayashi, Commissioner

RULE TEXT

R610. Labor Commission, Antidiscrimination and Labor, Labor.

R610-1. Minimum Wage, Clarify Tip Credit, and Enforcement.

R610-1-4. Tips[, Gratuities,] and Commissions.

A. An employer may credit the tips, sometimes referred to as gratuities, received by tipped employees (an example would be waiters and waitresses) against the employer's minimum wage obligation. The tips must be received by the employee, reported to the employer, and must reach a threshold of at least $30.00 per month before credit can be allowed.

B. An employer has a cash wage obligation of at least $2.13 per hour in meeting the required minimum wage[ of at least $2.13 per hour]. If an employee's tips combined with the employer's cash wage obligation of $2.13 per hour do not equal the minimum hourly wage requirement, the employer must increase its cash wage obligation to make up the difference.

C. A compulsory charge for service imposed on a customer by an employer's establishment, is not a tip. Such charges are part of the employer's gross receipts and within its discretion to allocate. Where service charges are imposed and the employee receives no tips, the employer must pay the entire minimum wage and overtime required by law.

D. All tips [or gratuities ]shall be retained by the employee receiving the tips [or gratuities]. However, this requirement does not preclude tip pooling or sharing arrangements where an employer mandates that tips be pooled and divided or shared among[pooling of tips or gratuities to be divided equally between] those employees who customarily and regularly receive tips[ or gratuities].

1. A bona fide tip pooling or sharing arrangement may include employees who customarily and regularly receive tips from customers directly or via a tip pooling or sharing arrangement[, such as waiters, bellhops, waitresses, countermen, busboys, and service bartenders].

2. [Employees such as d]Dishwashers, chefs, cooks, and janitors are not [considered ]tipped employees and do not qualify for a tip credit nor are they eligible to[may not] participate in an employer mandated tip pooling or sharing arrangement.

[D]E. Every employer using[intending to exercise] the tip [or gratuity ]credit must so inform [each]the affected employee at the time of hire. Any tip pooling or sharing arrangement must be made in writing and provided to each affected employee at the time of hire or prior to implementation.

[E]F. Where tips are charged on a credit card, and the employer must pay the credit card company a percentage of the bill for its use, the employer may reduce the amount of the credit card tips paid over to the employee by a percentage no greater than that charged by the credit card company.

[F]G. In computing the minimum wage, tips[, gratuities,] and commissions must be counted in the payroll period in which the tip[, gratuity] or commission is earned.

[G]H. This section does not apply to tips or commissions as delineated in Section 34-40-104(1)[(j)].

 

KEY: wages, minors, labor, time

Date of Enactment or Last Substantive Amendment: [September 8, 2007]2008

Notice of Continuation: November 30, 2006

Authorizing, and Implemented or Interpreted Law: 34-23-101 et seq.; 34-28-1 et seq.; 34-40-101 et seq.; 63-46b-1 et seq.