Rhode Island Tipping Regulations

Rhode Island has joined the list of states passing laws governing the payment of tips. House Bill (HB) 7510, which is codified as Public Law 2022-245, reflects nearly every tip-related aspect of the Federal Fair Labor Standards Act (FLSA) and its regulations. The law entered into force on June 28, 2022.

By law, tips are the sole property of the employee being tipped. A “tipped employee”, as under the RSA, is one who regularly and usually receives at least $30 in tips per month. Employers and employees are prohibited from entering into an agreement that would allow the employer to keep part of an employee’s tips.

However, employers can set up a valid tip pooling or tip-sharing arrangement among employees who usually and regularly receive tips. To this end, employers must notify their employees of the amount of any required contribution to the tip pool, may take tip credit only for the amount of tips each employee ultimately receives, and may not retain any of the tips from employees. , unless necessary for distribution to a valid tip pool or to offset actual charges assessed by a third-party credit card company (see below).

If an employer does not take tip credit and instead pays its employees the full minimum wage, it may allow non-tipping exempt employees to participate in a tip pool. Exempt employees, as defined in Part 541 of the FLSA regulations, cannot participate in a tip pool, whether or not tip credit is taken. The FLSA in this regard is somewhat broader, as the FLSA would exclude non-exempt “managers” or “supervisors” from participation in a tip pool (although the FLSA itself does this for most employers), while the Rhode Island law is limited to exempt only employees.

Amounts charged to customers as a service charge and distributed to employees cannot be counted as tips (either to establish an employee’s eligibility as a tipping employee or to determine the application of the credit for tipping) but, just as under the RSA, can be used to satisfy the employer’s minimum wage and overtime requirements.

If an employer is required to pay a credit card company a percentage of each credit card sale and that sale includes tips, the employer may deduct that percentage from the employee’s tips. The employer must notify the employee that he is taking this deduction and such deduction cannot reduce the employee’s wages below the applicable minimum wage. In addition, the employer must pay the employee all amounts owing by the next regular payday and may not withhold any amounts pending reimbursement from the credit card company.

© 2022 Jackson LewisNational Law Review, Volume XII, Number 192

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Elaine R. Knight