Washington, DC Tip pooling and Tip credit Laws | TipMetric 2020

For the nation’s capital, service industry employees who earn tips can find more information about the Washington, D.C. minimum wage, tip rules and standards for overtime pay at the website for the District of Columbia’s Department of Employment Services.

Washington, D.C. passed the Tipped Wage Workers Fairness Amendment Act in 2018. In doing so, it repealed a voter referendum increasing the city’s tipped minimum wage. With it comes new requirements regarding tipped employees, including:

· Sexual harassment training is mandatory

· Create and post a sexual harassment policy in the workplace

· Communicate tip-sharing policy to tipped workers

· Quarterly reports are to be filed with the Mayor’s office indicating that each employee has been paid a minimum wage, including those who accept tips

· Provide to tipped employees a pay statement with itemized payment information

· Beginning January 1, 2020, use a third-party payment administrator for employees receiving tips.

For more information on the new act, employees and employers may read the Tipped Wage Workers Fairness Amendment Act of 2018.

The Fundamentals About Tips

To begin, federal law and state of Washington, D.C. 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 Washington, D.C., that minimum wage is $14.00.

Employers in Washington, D.C. are able to claim a tip credit, meaning they may pay employees a wage that is as low as $3.89 per hour and receive a tip credit of $11.11. If the employee’s tips, along with the employer’s wage, does not add up to the Washington, D.C. 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

Washington, D.C. law does allow for tip pooling. All tips from the pool go to the employees and not the employer. Also, those pooled tips are to only go to the employees who customarily receive tips.

There are helpful online resources to help employers and employees better understand how to use tip distribution software.

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 Washington, D.C., this additional charge is not a tip and the establishment does not have to inform the patron of this.

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 Washington, D.C., an employer may reduce the employee’s tip by that 3%, but only if the employer provides written notice to the employee being tipped.

Persons employed within the hospitality industry in Washington, D.C. should have an understanding of the state’s rules and rites as well as an understanding of how their income may be impacted.

(Note: Most businesses track tips on paper and complex spreadsheets, which is labor intensive and prone to error, adding exposure to wage/tip lawsuits and IRS tip audits. Instead, TipMetric.com has developed a better solution. This innovative web app is purpose built to make tips distribution safe & secure. You simply enter the total tips collected and hours worked, and it calculates the distribution for you.)