Rich Crocco

One Way to Invite the DOL to your Business: Mess with Employees’ Tips

Payrolltips

While on vacation in Hawaii this week, I was searching for a local topic to write about that would relate to others reading this blog. To that end I came across a small article named “Hawaii steak house restaurants to return $150k to employees.” The restaurants named in the article were investigated by the U.S. Department of Labor for violations related to tip income. According to the article, “Tipped employees’ cash wages were reduced below the minimum wage of $7.25 and wait staff was required to return a portion of their tips to restaurant management.” It’s hard to decipher exactly what the violation was in this instance but it did get me thinking about reporting tip income in general.

Tip income can be a sticky subject for any tip related industry, from a federal compliance perspective to an employee relations perspective. Added to that is the fact that each state has their own rules regarding how tip income is to be reported. Businesses must have procedures setup to track employees’ tips i.e. credit card tips or rely on employees reporting their own tips to their employer. There are also Tip Agreement programs (such as TRAC) administered by the IRS that companies and employees can enter into. Visit IRS.gov for more information on available programs. I work in the Gaming industry in Nevada where one of the more popular forms of tip income reporting is the Tip Rate Determination Agreement (TRDA) or “Tip Compliance.” Read more…