Montana Tip pooling and Tip credit Laws | TipMetric 2020
In the state of Montana, service industry employees who earn tips should know about how their tips are handled, what their rites are and what the state law instructs.
While we can assume that virtually all wait staff understand what a tip is, what may not be known are the laws and rules that dictate how tips should be handled and treated by establishments employing wait staff. Employees in the state of Montana can visit the website the Montana Department of Labor and Industry website for more information.
Tip Credits
The federal minimum wage is currently $7.25 and the Montana minimum wage is $8.50 per hour, so tipped employees are entitled to at least the higher amount. In addition, employers in Montana are not allowed to take a tip credit. As a result, they must pay tipped employees, regardless of how much they make in tips, the state’s minimum wage.
Tip Pooling
Montana only allows for voluntary tip sharing and tip pooling (or “tipping out”) and that pool is shared among staff that assist in serving customers as part of their regular job duties. Tips from tip pooling should not go to the employer, manager or supervisors.
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 Montana, 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 (for example, 3% of the total bill charged to the credit card), and that customer leaves a tip as part of the credit card payment, the employer may be allowed to deduct the employee’s share of the credit card processing charge (for example, 3%) of the bill charged to the card the employee realizes in Montana. Although Montana law does not specifically address this issue, it does indicate that all tips, including credit card tips, belong to employees, not the employer.
Persons employed within the hospitality industry in Montana should have an understanding of the state’s rules and rites as well as an understanding of how their income may be impacted.