Washington: New Administrative Policy on Tips

The Washington Department of Labor & Industries recently issued an administrative policy providing guidance on tips, gratuities, and service charges under the Washington Minimum Wage Act. Key portions of the policy include:

• Tips and gratuities due to an employee may not be used by the employer for any purpose except to administer a valid tip pool amongst qualifying employees.
• Employers may not use tips as a credit toward the state minimum wage requirements.
• Employers may establish tip pools among qualified employees.
• Employers may, but are not required to, assist in tip pools established by employees.
• Managers and supervisors may only accept tips for services they directly provide, but may not otherwise be part of tip pooling if classified as exempt.
• Employers may have a policy prohibiting employees from accepting tips, but if a customer leaves a tip anyway, the employee must still receive the tip.
• The employee portion of service charges must be a line item on a customer invoice, paid to the employee, and may not be paid in lieu of wages earned. This applies to employees who serve customers, excluding managers and supervisors. Examples of how to disclose service charges are provided in the administrative policy.
• Employees may immediately keep cash tips. Tips received by the employer (e.g., credit card) must be paid to the employee in the same pay period in which they were earned.
• Employers may not require employees to contribute more to a tip pool than the amount of tips actually earned.
• Employers may deduct a prorated percentage of a credit card transactional fee from the tip received by the employer.
• Employers do not owe tips employees would have earned while using paid sick leave.