Delaware Tip pooling and Tip credit Laws | TipMetric 2020
For Delaware state, service industry employees who earn tips can find more information about Delaware minimum wage, tip rules and standards for overtime pay at the website for the Delaware Department of Labor.
The Fundamentals About Tips
To begin, federal law and state of Delaware law has determined that a restaurant tip belongs to the employee rather than the employer. This means that employers cannot simply ask staff to hand over tips. With that said, there are exceptions if certain criteria are met.
· A tip credit can be taken, meaning that state law allows the employer to count some of all of the employee’s tops as part of its obligation towards minimum wage.
· A valid tip pool exists, and under federal law and most state laws, employees are required to pay part of their tips into a pool that is then shared among other employees within the establishment.
Tip Credits
Due to the federal minimum wage (or state minimum — whichever is higher), employees are owed a minimum wage per hour. At the federal level, that amount is $7.25. In the state of Delaware, that minimum wage is $8.75 and will then become $9.25 on October 1, 2019.
Employers in Delaware are able to claim a tip credit, meaning they may pay employees a wage that is as low as $2.23 per hour. If the employee’s tips, along with the employers wage, does not add up to the Delaware minimum wage, then the employer must make up the difference.
Multiple Jobs
In an environment where an employee, during an 8-hour shift, may wait tables for 6 of those hours but then be assigned other support duties outside of the restaurant for the remaining two hours, federal law indicates that a tip credit cannot be claimed by the employer for those 2 hours outside of the restaurant.
Pooling Tips
Delaware law does allow two kinds of tips: voluntary and mandatory. For mandatory, a tip pool required by an employer involves only those employees who serve the customer. A maximum of 15% can be contributed to a pool that is then shared among other employees that serve the customer. The employer may not take any part of the tip contributed to the pool. For voluntary, the law in Delaware allows employers to set up a system for a tip pool and the rules are set up by the employees, who may volunteer to participate in it (they cannot be coerced to participate in it).
Mandatory Service Charges
A mandatory service charge is sometimes added to a customer’s bill if warranted, for things such as larger tables, private parties or similar circumstances. This is viewed as part of the contract between the customer and the restaurant and not an indication of good service by the wait staff. In Delaware, this additional charge is not a tip and it should be noted that the establishment should inform the customer of this. If any portion of that service charge is shared with the service staff, then customers should be made aware of that as well.
The Internal Revenue Service, in 2014, created an incentive for establishments to no longer charge mandatory service charges if any portion of it is shared with the staff. If part of the service charge is shared with staff, then it must be categorized as wages instead of tips, and, as a result, must have Social Security and Medicare withheld on these amounts. Any amount given by the customer above the normal cost of food and taxes must be voluntary if it is to be properly categorized as a tip to the service staff.
Credit Card Charges
If an employer pays a processing fee to accept credit cards from customers, and that customer leaves a tip as part of the credit card payment, then in Delaware, the law does not determine if the employer can take the processing fee from the tip left for the employee.
Persons employed within the hospitality industry in Delaware should have an understanding of the state’s rules and rites as well as an understanding of how their income may be impacted.