Tip credit crackdown | nnbusinessview.com

Tip credit crackdown

John Seelmeyer

Investigators from the U.S. Department of Labor will focus in coming months on employers who pay a lower minimum wage to workers who also receive tips.

A key question that investigators will examine is this: Did the employer notify workers that they would be credited for tips when their minimum wage is calculated?

“If they don’t get it right, they are subject to violation of federal labor standards,” says Brian Yeskovich, a Reno-based investigator with the Department of Labor.

And employers who don’t handle the situation correctly can be required to cover back pay for violations extending back as far as two years.

The issue is important to hundreds of employers in gaming, hospitality and restaurant businesses around the region.

Nevada employers who provide qualified health coverage must pay at least $5.30 an hour to employees who also earn tips. The employers must be able to show that the tips are enough to get workers’ hourly pay up to a total of $5.85 an hour the federal minimum wage.

Workers who don’t have a health plan must be paid at least $6.33 in Nevada. Because that’s above the federal minimum wage of $5.85, so the tip-credit system doesn’t apply to them.

Yeskovich encourages employers to inform workers in writing not orally that they plan to use the tip-credit method of calculating minimum wage. That, he says, reduces the likelihood of disputes between workers and employers later on.

Confusion is widespread among Nevada’s employers, and Rob Parker, a human resources representative with the Nevada Association of Employers, says HR departments and bookkeepers have been hit by a perfect storm of new rules within the last year.

First, Nevada voters last November established a two-tiered minimum wage currently, it’s $5.30 for workers who have a health plan, $6.33 for those without.

Second, Congress jumped the federal minimum wage to $5.85 effective July 24. For the first time in decades, the state’s minimum wage is lower than the federal figure.

That means that employers can use tips as a credit only to cover the gap between the $5.30 state minimum wage and the $5.85 federal minimum.

The crackdown on employers who don’t follow the law is likely to be harsh, Yeskovich says, because court decisions don’t give the Department of Labor much leeway in enforcement.

And he says that Labor Department investigators looking at tip-credit issues also are likely to take a wide-ranging look at all of a company’s wage-and-hour practices.


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