Rhode Island enacts new ‘tip protection’ law

On June 28, 2022, Rhode Island Governor Daniel McKee signed a new “tip protection” legislation. The law prohibits employers of tipped employees from retaining employee tips, creates new requirements for tip pools, and establishes requirements for tip deductions for credit card processing.

Existing law regarding tipped employees

Rhode Island allows employers to deduct a tip credit from the general minimum wage (currently $12.25 per hour). Employers can pay tipped employees wages of at least $3.89 per hour as long as weekly tips make up the difference ($12.25 – $3.89 or $8.36 per hour) . Employers are required to provide “substantial evidence” that the tips each employee receives each week bring their earnings to at least minimum wage. This “substantial proof” can be a form signed by the employee listing the tips received for the week. These requirements have not been changed by the Tip Protection Act and remain in effect.

The new status

The new tip protection law applies to “tipped employees, meaning any employee “working in an occupation in which the employee habitually and regularly receives” more than $30 per month in tips . The law applies to all employers in Rhode Island.

The Tip Protection Act first clarifies that tips are the exclusive property of the employee being tipped. Employers cannot take “any part” of a tip from an employee. The only exception is credit card processing fee deductions, which may be taken from an employee’s tips if the employer informs the employee of the deduction and the amount does not bring the employee below the minimum wage. Tips must also be paid no later than the regular payday; tips cannot be withheld because the employer is awaiting payment from a credit card company.

The law also outlines the requirements for a valid tip pool. A tip pool may be established among employees “who habitually and regularly receive tips”, provided that the employer (1) informs employees of the tip pool contribution amounts, (2) takes tip credit only for the amount actually received by each employee, and (3) does not take any portion of tips for itself (except credit card processing fees). A tip pool may include employees who are not “tipped employees”, but only if the employer pays full minimum wage and takes no tip credits, and no exempt employees are included in the tip pool. tip pool. For example, a restaurant might have a tip pool including all of its servers and pay them $3.89 an hour, but if it wanted to include back-of-house employees such as cooks, it would have to pay the full minimum wage of $12.25.

“Service fees”, meaning mandatory fees charged by an employer to a client or client, belong to the employer, not the employee. If an employer chooses to distribute money from service charges to employees, that amount can be credited against minimum wage obligations, such as tip credit. Employee service charge distributions do not count as tips when determining whether an employee earns $30 per month in tips to qualify as a “tipped employee”, although all tips received Beyond service fees count in this calculation.

Recommendations

The law entered into force on June 28, 2022, immediately after it was signed. Rhode Island employers with tipping employees should review their policies and practices to ensure (A) they do not withhold any portion of employee tips, (B) tip pooling arrangements comply with legal requirements and (C) that employees are properly informed of tip pooling or credit card deductions.

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