Tuesday, June 29, 2010

The Treatment of Tips under the FLSA: What Constitutes a Tip?

A tip is presented by a customer as a gift or gratuity in recognition of service performed.  Bingham v. Airport Limousine Serv., 314 F. Supp. 565, 572 (W.D. Ark. 1970); WH Admin. Op. (Dec. 26, 1973); WH Admin. Op. (Apr. 30, 1975); 29 C.F.R. §§ 531.52, .53.   

Tips must be money or its equivalent.  29 C.F.R. § 531.53.   

Any compulsory charges or service charges (such as banquet fees) are not tips even if distributed to employees.  Mechmet v. Four Seasons Hotels, 639 F. Supp. 330 (N.D. Ill. 1986), aff’d, 825 F.2d 1173 (7th Cir. 1987); WH Admin. Op. (Jan. 15, 1975); WH Admin. Op. (Feb. 18, 1975); 29 C.F.R. §§ 531.52, .55.   

Compulsory and service charges can count towards minimum wage requirements.  29 C.F.R. § 531.55(b); Melton v. Round Table Rest., 20 WH Cases 532, 535 (N.D. Ga. 1971).

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