As we know, state labor laws and regulations are constantly changing. For example, I recently learned about a case in New England where the Massachusetts Supreme Court found a golf course failed to provide their tipped employees all of the tips legally due to them.
The issue began in 2020 when the state legislature passed the Tip Act. Before the passage of this law, food and beverage operators listed tips and service charges as separate charges the guest was required to pay when executing a private contract. The employer would give tip-eligible employees 100% of the tip fees collected. The service charges generally were retained by the employer to offset the administrative costs.
Effective January 2021, the Tip Act required both the tip and service charge fees collected to be paid to tip-eligible employees. The club challenged the department of labor. While the employer received favorable rulings from the lower courts, the employees appealed to the state supreme court. The court decided to favor the employees (plaintiff) and ordered the golf course to pay back wages, court fees, and state penalties.
Within the Tip Act, the law provides employers the right to charge customers a house or administrative fee that the employer could retain. Section (d) of the Act states;
“Nothing in this section shall prohibit an employer from imposing on a patron any house or administrative fee in addition to or instead of a service charge or tip, if the employer provides a designation or written description of that house or administrative fee, which informs the patron that the fee does not represent a tip or service charge for wait staff employees, service employees, or service bartenders.”
While this law is from Massachusetts, we can expect other states may choose to apply similar policies within their wage laws. Therefore, NGCOA would recommend owners and operators review your state’s wage laws relative to tipped employees and ensure your contracts properly reflect how fees are to be collected and distributed.
NGCOA monitors many of the potential laws and regulations being proposed at the federal and state level. But sometimes, impacting regulations can be incorporated within other more significant pieces of legislation, so we ask you to let me know if you become aware of laws or regulations being discussed in your state that will impact your business. Email me at firstname.lastname@example.org.