Can managers take tips when they aren't doing "tippable" work?

[Makayla5014]

Jurisdiction

North Carolina

I'm working in an establishment where everyone is paid over minimum wage and managers are on a salary (obviously they get paid significantly better than hourly employees.) Recently , we've hired a new manager who doesn't seem as if she is familiar with what is acceptable in the work place and what is not acceptable. First, my question is, is a manager allowed to take a portion of the tips earned in a tip pool if the manager is not doing "tippable" work. For example, my manager sits in the office most of the day doing office work, gets paid better than I do, and at the end of the day, she still takes anywhere between half, and a third of the tips that I earned throughout the day. She isn't helping me in the front of the house, but she still claims half of the tips. I brought it to our owners notice, and his response was, "it's okay for her to do that because she isn't making much right now." My issues with his response- 1. It is not my responsibility to compensate for her low wage, and 2. If she isn't doing equal work, then I feel like she's stealing hard earned money from me..... My second issue, The suggestion was made that if our manager catches us on our cellphones during the day, then we cannot recieve any of the tips made in that day. However, NC is a right to work state, I know that I could get fired for anything, so I don't want to complain too much to our owner or my manager. Any advice on what to do, what is legal, and how to handle the situation without getting fired?

 

[ElleMD]

Right to Work has nothing to do with it as this has nothing to do with unions. Are you making more than minimum wage before tips are added? Are these tips cash tips like a server in a restaurant receives or a service charge of some kind?

 

[Makayla5014]

Right to Work has nothing to do with it as this has nothing to do with unions. Are you making more than minimum wage before tips are added? Are these tips cash tips like a server in a restaurant receives or a service charge of some kind?

I'm making 9.25 before tips, and the tips we get are all in cash... it's a coffee shops, where tips are divided between everyone who is working.... I don't think that a manager who isn't helping should be able to take tips...

 

[Makayla5014]

Right to Work has nothing to do with it as this has nothing to do with unions. Are you making more than minimum wage before tips are added? Are these tips cash tips like a server in a restaurant receives or a service charge of some kind?

I believe that I got "Right to work" confused with "At will employment."

 

[txls]

As long as you're making minimum wage, the law doesn't really care how tips are divided up.
It's simply your opinion regarding who and how. As far as the cell phone issue, leave your cell phone in your car and that won't be an issue.

 

[Makayla5014]

As long as you're making minimum wage, the law doesn't really care how tips are divided up.
It's simply your opinion regarding who and how. As far as the cell phone issue, leave your cell phone in your car and that won't be an issue.

Withholding pay is illegal, is it not?

 

[army judge]

First, my question is, is a manager allowed to take a portion of the tips earned in a tip pool if the manager is not doing "tippable" work.

North Carolina law addresses "tip pools in the following manner:

Tipped employees shall retain all tips he or she receives, except in limited situations described below (credit card tips; tip pools).

A tipped employee is one who regularly receives at least $20 a month in tips.

If the owner or manager sets up a company managed "tip pool", those tips can be distributed anyway the "tip pool" administrator determines, just so lang as such distribution is made clear to all involved.

Credit Card Tips: If a customer pays by credit, charge or debit card and includes a tip for an employee, the North Carolina Wage and Hour Act states that:



• The tip accrues to the employee at the time of the charge, and the employer shall pay the employee the charged tip no later than the payday for the pay period in which the customer signs the charge; and
• Employers may retain from the tips an amount up to or equal to the pro rata portion of the fee charged by the card issuing company which is attributable to the tips.



Tip Credit: To claim a tip credit toward the minimum wage, employers must notify the employee (see elements that the notice must contain below) that they intend to claim the tip credit. The employee must retain all tips, subject to any valid tip pooling arrangement (see "Tip Pooling"). For each employee for whom a tip credit is claimed, employers must:



• Keep complete and accurate records of the amount of tips received for each workweek. The employee certifies these records either monthly or each pay period. Employee certification is the employee's signature or initials on the employer's records;

• Record the amount being claimed as a tip credit for each employee for each workweek;

• Record for each employee participating in a tip pool, for each workweek, the amount of contributions to the tip pool; and

• Record for each employee participating in a tip pool, for each workweek, the amount received from the tip pool.

• Inform a tip employee before taking a tip credit of the following information: A) the direct cash wage the employer is paying the tipped employee, which can be more than, but cannot be less than, $2.13 per hour;



B) the additional amount the employer is using as a credit against tips received, which cannot exceed the difference between the minimum wage specified under the FLSA and the actual cash wage paid by the employer to the employee;



C) that the additional amount claimed by the employer on account of tips as the tip credit may not exceed the value of tips actually received by the employee;



D) that the tip credit shall not apply with respect to the tipped employee unless he or she has been informed of the tip credit provisions under Section 3(m) of the FLSA; and



E) that all tips received by the tipped employee must be retained by the employee except for the pooling of tips among employees who customarily and regularly receive tips. 29 C.F.R. § 531.59(b).



If an employee refuses to certify, or to certify accurately and completely, the amount of tips he or she received, employers may claim a tip credit if the employee retained all tips, the above recordkeeping rules were followed, and the employer can demonstrate with written documentation that:



• The employee certified having received tips in the amount for which the credit is taken;

• A similarly situated tipped employee received tips in the amount for which the credit is taken; or

• The tipped employee regularly receives tips in the amount for which the credit is taken using another reliable method.



Employers must make sure that the amount of an employee's tips and wages equals at least the minimum wage. If an employee does not make enough in tips to reach minimum wage, an employer must increase the amount of the employee's wages for that week to equal the minimum wage.



Tip Compliance Agreements: The IRS has established voluntary compliance agreements for industries, such as the restaurant industry, where tipping is customary. These agreements are designed to enhance tax compliance among tipped employees through taxpayer education, instead of through traditional enforcement actions, such as tip examinations.



Four types of tip agreements have been developed for the food and beverage industry over a period of almost 20 years by the IRS, but only three now remain in effect: Tip Reporting Alternative Commitment ("TRAC"); Tip Rate Determination Agreement ("TRDA"); and the Employer-Designed Tip Reporting Alternative Commitment ("EMTRAC"). Note: the Attributed Tip Income Program ("ATIP"), developed and issued in 2007 has been withdrawn by the IRS.



Tip Pooling: Tip pooling is an arrangement in which all or part of the tips of the contributing employees are combined into a common pool and then divided among the participating employees according to a pre-determined formula. An employee's share of a tip pool is that portion of the total amount in the pool that the employee receives. While the U.S. Department of Labor amended its tip pooling requirements in a regulation effective May 5, 2011, 29 C.F.A. § 531.54, in North Carolina, a tip pooling arrangement is valid when:

• The contributing employees are notified of the arrangement before the pay period in which it will be used;
• The share of each contributing employee is at least 85 percent of the employee's tips before the employee contributes to the tip pool; and
• Only employees who customarily and regularly receive tips receive a share from the pool (e.g., wait staff, bartenders).

The employer must maintain accurate and complete records of the tips received and the amount of tips earned under the tip pooling arrangement.



Tip Reporting: By law, all servers who earn more than $20 per month in tips are required to report all of their tips to their employer for tax purposes. The Internal Revenue Code requires that tipped employees maintain accurate daily records of tip income and that they make written reports to their employer of such income at least once a month, and no later than the 10th day of the month following the month in which tips are received by the employee (e.g., for tips received in October, employee reports are due no later than November 10). The IRS has made the process a little easier by making available for free on its website Publication 1244, "Employee's Daily Record of Tips and Report to Employer" (see www.irs.gov/pub/irs-pdf/p1244.pdf). Employers may require reports more often; many require it each payroll period. Failure to report tips may result in prosecution by the IRS.



In addition, restaurants which employ more than 10 employees (tipped and non-tipped) or their equivalent (80 employee hours) on a typical day where tipping is customary are responsible for providing the IRS with information on the tipping practices and reporting at their establishment. Form 8027 must be sent to the IRS on or before the last day of February of the year following the reporting year. The IRS has provided later filing dates for those filing electronically. Please check the instructions on From 8027. Employers must also inform their employees on the law and do an "allocation" for directly tipped employees such as waiters, waitresses and bartenders if reported tips are less than 8 percent of the establishment's gross annual sales. Allocation amounts must be on the employee's W-2 forms, which are given to them in January.



Summary of the tip reporting law:
• Employers required to file Form 8027 must do so by the last day of February each year for the preceding year;
• Businesses required to comply include all food or beverage establishments where tipping is customary and which employ more than 10 employees (tipped and non-tipped) or their equivalent (80 employee hours) on a typical day;
• Employers must gather the information they need for the reports;
• If the total reported tips are not equal to at least 8 percent of the establishment's gross receipts, the shortfall must be allocated;
• Employers must use either the 7 step IRS formula or a "good faith" agreement. Those with less than 25 employees may use either "hours worked" or "individual gross receipts" to determine the allocation amounts for directly tipped employees with a reporting shortfall. Employers with 25 employees or more are required to use the "individual gross receipts" method for employee allocation;
• No allocation is necessary if the establishment's employees as a group are reporting total tips equal to or in excess of 8 percent of the establishment's gross receipts;
• Employers should inform their employees that tips are taxable income and all tip income must be reported;
• Tips must be reported voluntarily;
• Only voluntarily reported tips are subject to withholding;
• Employers are not to withhold from allocated amounts. Allocation amounts are for information only to both the employee and the IRS;
• Service charges are not considered tips for the purpose of tip reporting. (See "Service Charges."); and
• W-2 forms for tipped employees should reflect tips reported by the employer and any tips allocated for employees who report less than 8 percent of gross receipts computed as requested.



Please note that all establishments of the same employer are combined for purposes of determining coverage for tip reporting purposes, but each establishment must report separately. Separated units within the same building, e.g., coffee shops and dining rooms, or bar and snack shops, may be treated as separate establishments for tip reporting and for allocation purposes if customers of the different food service operations sit separately and if gross receipts for each operation are recorded separately. Even operations occupying the same space at different times, such as a lunch hour cafeteria or buffet that becomes an evening dining room, may be treated as separate establishments, provided the gross receipts are kept separately.



FICA Tax on Tips: Federal law requires all employers to pay tax under the Federal Insurance Contributions Act ("FICA" or social security tax) on all reported tips from tipped employees, defined under federal tax law as persons who receive at least $20 a month in tips. The IRS has been auditing employees and assessing back taxes for previously unreported tips. It also is assessing employers for the FICA payments due on these unreported tips from previous years.



Under federal law, Section 45 B of the federal tax code, 26 U.S.C. § 45 B, many restaurants are eligible to receive a tax credit for FICA taxes paid on tips. Employers are eligible for this credit if they pay FICA taxes on tips at an establishment that serves food or beverages for either on-premise or off-premises consumption. Taxes paid by employers on tips received by persons who provide food or beverage for consumption off premises (e.g., tips received by delivery persons), may also be claimed by employers under this credit. This tax credit is only a credit, not a refund, and is limited to FICA taxes paid by the employer on tips that exceed the federal minimum wage in effect on the passage of the federal law in May 2007 (i.e., $5.15 per hour). Thus, for services performed on or after January 1, 2007, the FICA tax credit under federal law may be taken by the employer for FICA tax paid on tips that exceed $5.15 per hour regardless of any future increases in the federal minimum wage rate or any higher North Carolina state minimum wage rate. In order to receive the credit, an employer must have federal income tax liability to offset the credit. The federal income tax liability can be past, present or future. This means that if employers do not have liability in a given year, they can carry it forward for up to 15 years or back for three years. The law does not change any of the present requirements for the withholding or payment of FICA tax or any other tax for either the employer or the employee.



To file for the credit, operators should use Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, which can be obtained by contacting the IRS at 800-829-3676 or at www.irs.treas.gov. NCRLA members can request the IRS booklet, "Tips on Tips," by calling the NCRLA office at 800-582-8750.

Law Review: Tips - North Carolina Restaurant and Lodging Association

 

[leslie82]

Withholding pay is illegal, is it not?

How is your pay being withheld? You make 9.25 an hour. I was a waitress in college. I made 3.20 an hour plus tips and two hours later 3.40. I would have much righter made 9.25 an hour and no tips.

 

[Makayla5014]

How is your pay being withheld? You make 9.25 an hour. I was a waitress in college. I made 3.20 an hour plus tips and two hours later 3.40. I would have much righter made 9.25 an hour and no tips.

When everyone is working, everyone gets an equal amount from the tips that are give to us while we're working, but if she sees us on our phones, we are not allowed to take tips for the whole day. Is that not withholding pay?

 

[leslie82]

When everyone is working, everyone gets an equal amount from the tips that are give to us while we're working, but if she sees us on our phones, we are not allowed to take tips for the whole day. Is that not withholding pay?

Legally I don't know. I wouldn't think so because you still get an hourly wage. She doesn't HAVE to allow tips but she does. So if she has rules about tips then she has rules about tips. Just stay off your phone unless there's an emergency. How hard is that? OR if you don't like her rules go find a different job.