Interesting Tip payment rules from the Dept of Labor

While doing a little reading of the now infamous Department of Labor Field Operations Handbook (thanks Gregster!), I came across this information about paying employees tips that are put on credit cards.

  1. According to paragraph 30d05, section (a) - you CAN reduce the amount of the tip by the percentage charged by your CC processor to process the transaction. So, if the tip on the CC is $1, and your CC transaction cost is 3%, you only need to pay 97 cents

  2. According to section (b) of that same section - you can hold those CC tips and not pay them to the driver until the next regular payday for that work period.

  3. According to section (d) of that same section - you can recover from the driver any tips that were paid and subsequently chargedback - as long as the amount to be recovered doesn’t reduce the pay for that period below MW.

Does anyone here do any of this?

I DO NOT reduct the tip amount by my transaction processing fees. Think about 1 driver working 5 days per week, making $30 in CC tips per day. That’s $7800 per year. At, for example, 3%, that’s $234 per year per driver out of my pocket that I should not be paying according to the DOL.

I DO NOT hold the CC tips and pay them at the next pay period. CC tips are given to the drivers every night at cash out.

I DO NOT ask the drivers to refund to me the tips on CC orders that were chargedback.

In some of my reading of DOL rules and interpretations I read something addressing the percentage charged by your processor and understood that you could not charge this amount to your tipped employees. Maybe I read it wrong or maybe this has been addressed multiple times in different ways. I ran across this a few weeks ago so I don’t think I’ll waste my time looking for it again but if you do decide to follow these, make sure what you are reading from is currently relevant.

I’m not planning on changing the way I do things, at all. The logistics of doing so would be a nightmare.

Just found it interesting…

LOL, I wouldn’t be surprised if gregster will avoid this thread…Maybe his employer might take advantage of this DOL rule & start deducting 3% of all of gregster’s CC tips?.. :shock: …, I’m just kidding… :lol:

I once made a driver pay me the tip from a transaction that was charged back but this was a driver that knew he broke the rules when he gave $30 cash back on a $40 tip on an $11 credit card transaction.

Very Interesting.

Barrage of Gregster posts incoming…

All of the above are correct and I would have no problem with an employer taking advantage of them. I have read elsewhere that some employers do. They commonly just deduct the transaction fee from CC tips, but forego the other two rules. You do go on to say later that it takes more work to take advantage of these rules. Same thing as only paying actual cost on mileage, you must do the extra paperwork to take advantage of the savings.

I’m glad to see someone else besides me sees benefit in reading about the laws that cover their line of work. :smiley: And like Nick always says, be sure to consult with your CPA or Attorney as appropriate before changing any business practices. :slight_smile:

I might reconsider my statement about the logistics of retaining the (for example) 3% fees.

I’m already tracking CC tips for payroll and reporting purposes, so I already know those amounts.

Even though I’m paying the entire tip amount each night to the driver, I should be able to deduct the 3% from the pay amount each payday (as long as it doesn’t put them below minimum wage). Doing that would be logistically simple.

I did a quick calculation and this amounts to almost $3,000 for 2008. (across 4 stores). That’s enough to at least look further into this.

Maybe gregster can learn something from Nick then…He can take the advice of a CPA & or Attorney & make good on it for himself instead of spewing his disgruntle self on peole that are content in this business…I say bahumbug to all this DOL rhetoric…I’m a firm believer of the “You scratch my back I scratch yours” old school mentality…I apply this golden rule towards my employer & because of it I get the hours I want, over 10 bucks an hour, a happy work environment…And even after factoring in gregster’s infamous word of gospel IRS mile rate of 55 cents…I still make over 20 an hour on at least the 2 out of 3 shifts I work a week…All for just delivering pizzas…Easiest job I’ve ever had…How can I NOT be happy with that?..I suppose all the shop owners could apply this DOL rule in their favor if they want to … :slight_smile:

A different source of information some of you may find more useful as it is written to more closely reflect your actual situations is the NRA (National Restaurant Association) website:

Here is some consice info on tips from the business point of view:

Tip-Reporting Basics

If your software allows it you could program it to deduct the 3% the same night as tips are paid out. That is how I read that other companies do it.

Unfortunately my software does not have provisions for this. I’d be suprised that many POS systems do, because I don’t think many people know that this can be done.

Gregster, have you had a chance to see my last post on the other thread?

Earlier I linked to the National Restaurant Association website. Personally I don’t like the NRA because they are ‘anti-labor’ in their views (IMHO), but unlike others I encounter regularly, if the information is accurate, I don’t care about the slant of the source. I frequently use their website as a convenient place to find concise information about the industry. I have always found their legal information to be accurate. It is their opinions I disagree with. I don’t attack the source of the information (unless attacked first) just because I disagree with the information posted but otherwise can find no errors in it. I am regularly bashed because I am supposedly ‘anti-business’ as people seem to deduce from my incessant rants about minimum wage laws. I am not anti-business. I am ‘anti-lawbreaker’ if you will.

Anyone who attacks the source instead of the content of the post shows their character (or more correctly, the lack of it).

No, I haven’t read that thread yet today. I will when done here. By the way I am really glad you found some useful information from all of this.

Eveyone relax. No need to turn this into anything personal. There is a decent discussion going on here and I don’t want it to turn into a turd.

I had heard this somewhere before…although I appreciate the discussion I could not imagine doing all the paper work involved for a few bucks and to me 200 is a few bucks (over a year’s time) Not to mention it would leave a bad taste in an employees mouth. I think there are certain fees we have to pay in order to do business and this is one of them.

Don’t get me wrong…I am a quarter finder around our shops, I am known as a legendary tightwad when it comes to certain things but to me this would just be a waste of my time.

Plus, if ya gonna do all that how bout bounced checks…

Just a bunch of extra paperwork for a few bucks. YUCK!


Fair enough gregster…If I may ask you a few questions…

So far in your quest for your strict legal standard quotas with regards towards your employer…Have you filed or are there any current class action lawsuit against your employer on behalf of your interests, with regards towards these violations you presume?

If so, has there been any current judgement in your favor as of yet & what are the monetary judgements?..

Now that you opened up this can of worms so to speak…

How would you feel if your employer took advantage of these “tip payment rules from the DOL” & applied them towards your CC tips?..

Thank you… :slight_smile:

If anyone has questions or wishes to discuss further what actions I have personally taken against my employer, please start a new thread, and not hijack this one. It is a lengthy story.

Noo HiJacking here, a simple Yes or No would’ve done on his legal issues, oh well…Just an observation though…Ever notice how gregster conveniently doesn’t answer questions that would affect him negatively?..

You never answered the related question…

How would you feel if your employer took advantage of these “tip payment rules from the DOL” & applied them towards your CC tips?..

If you can accomplish some or all of the above with in house software edits, then except for the programming it is a ‘no brainer’ to save some money. If however it must be accomplished manually using actual paperwork, the labor cost in doing so might not justify the savings gained.

If an employer is following the law about wages and reimbursement, employees should not be upset to follow the other portions of the law that may not be in their favor.