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Code of Federal Regulations Pertaining to ESA |
| Labor |
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| Wage and Hour Division, Department of Labor |
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| Wage Payments Under the Fair Labor Standards Act of 1938 |
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| Interpretations |
29 CFR 531.55 - Examples of amounts not received as tips.
- Section Number: 531.55
- Section Name: Examples of amounts not received as tips.
(a) A compulsory charge for service, such as 10 percent of the
amount of the bill, imposed on a customer by an employer's
establishment, is not a tip and, even if distributed by the employer to
his employees, cannot be counted as a tip received in applying the
provisions of section 3(m) and 3(t). Similarly, where negotiations
between a hotel and a customer for banquet facilities include amounts
for distribution to employees of the hotel, the amounts so distributed
are not counted as tips received. Likewise, where the employment
agreement is such that amounts presented by customers as tips belong to
the employer and must be credited or turned over to him, the employee is
in effect collecting for his employer additional income from the
operations of the latter's establishment. Even though such amounts are
not collected by imposition of any compulsory charge on the customer,
plainly the employee is not receiving tips within the meaning of section
3(m) and 3(t). The amounts received from customers are the employer's
property, not his, and do not constitute tip income to the employee.
(b) As stated above, service charges and other similar sums which
become part of the employer's gross receipts are not tips for the
purposes of the Act. However, where such sums are distributed by the
employer to his employees, they may be used in their entirety to satisfy
the monetary requirements of the Act. Also, if pursuant to an employment
agreement the tips received by an employee must be credited or turned
over to the employer, such sums may, after receipt by the employer, be
used by the employer to satisfy the monetary requirements of the Act. In
such instances, there is no applicability of the 50-percent limitation
on tip credits provided by section 3(m).
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