2024 Maine Restaurant Tip Pooling Laws

Maine has a significant hospitality industry. With food, farming, tourism and ranching industries prevalent throughout the state, hospitality — and more specifically the service industry — employs a large number of people. Many employees within the service industry who earn tips should be aware of how their tips are handled in relation to employee and state rules.

Typically, service staff have a basic understanding of tipping at restaurants, hotels and other places of hospitality. What may not be as well-known are the rules that determine how tips should be handled by those establishments employing service staff. For information on topics such as minimum wage, tips rules, overtime standards and additional guidelines on wages, readers can visit the Maine Department of Labor website.

General Information About Tips

Federal and state of Maine law has said restaurant tips belong to the employee, not the employer. Therefore, employers can’t ask staff to hand over their tips. There are exceptions when certain criteria are met.

· Tip credits can be taken. This means state law allows the employer to count some, or all, of the employee’s tips as part of its requirements regarding the minimum wage.

· If a valid tip pool does exist, then employees are obliged to pay part of those tips into a pool that is then shared by other employees within the restaurant.

There are resources online to help both employers and employees better understand how to use automated tip sharing software.

Tip Credits

Employees are owed a minimum wage per hour, according to federal or state minimum wage standards. The state of Maine has a minimum wage of $12.00. Maine does allow employers to take tip credits for employees. Employers are required to pay a minimum of $6.00 per hour and the employer can take a tip credit of $6.00 per hour. This is the case as long as the wait staff earns at least the minimum wage with their tips.

Tip Pooling Explained

In Maine, employers are allowed to require tip sharing, or tip pooling. Tip pooling involves the combining of tips earned by customer-facing staff and a percentage of that pool being shared with staff that assist those staff members who serve. Customer-facing employees receiving tips are only required to pool what is reasonable and are able to ensure that whatever amount they keep successfully meets the requirements for minimum wage.

To help employers who incorporate tip pooling in their establishments, automated tip pooling software is available to make it easier for owners, manager and service staff to accurately account for tip management and payroll processing.

Mandatory Service Charges

On occasion, a mandatory service charge is added to a customer’s bill to accommodate for things such as private parties, larger tables and other situations that require more staff attention. Many restaurants incorporate these practices, viewing it is an understood contract between the restaurant and the customer and not a direct result or indication of exceptional service delivered by the wait staff. In the state of Maine, this added charge is not a tip and it is preferred that the restaurant make the customer aware it in writing, verbally or otherwise. The customer should also be made aware of the fact that service charge is shared among the service staff, if that is what does take place.

As an incentive for establishments to no longer implement mandatory service charges if some or all portions of it are shared with the staff, the IRS created rule regarding this practice. If any part of the service charge is shared among staff, that amount must be considered as part of the wait staff’s wages rather than a tip. In addition, Social Security and Medicare withholding must be incorporated on the amount shared among staff. Furthermore, an amount provided by the customer that is more than the standard cost of food and taxes must be viewed as voluntary if it is to be categorized properly as a tip given to the staff.

Credit Card Fees

Customers often pay by credit card when dining out. In cases where an employer is charged a processing fee when accepting a credit card, and the customer pays a tip using that credit card, the employer is prohibited from deducting the employee’s share of the processing fee. Maine’s state law views tips charged on a credit card the same as tips given directly to the service employee. This may mean that an employer may not withhold any credit card processing fee from the employee’s total tip amount.

Responsibility of the Employer and Employee

Labor rules, laws and guidelines in the state of Maine should be understood by persons employed by the hospitality industry. An understanding of such information helps employees know the impact on their income. Utilizing automated tip distribution software for restaurants will also go a long way in helping employers and their employees more accurately manage tips and income.