Page 25 - BusinessWest July 21, 2021

Some Tips on Tips
Breaking Down the Trickier Aspects of Massachusetts Laws
By Ludwell Chase and Amy B. Royal, Esq.
State and federal laws pertaining to mini- mum wage, tips, overtime, and employing minors are complicated. As a result, these
are areas where mistakes are often made. Employers, however, cannot afford these errors
because the consequences of not complying with these laws can be very costly. In fact, in Massachusetts, there are
generating activities, such as serving customers, and no more than 20% of their time performing not directly tip-generating activities, such as set- ting tables. This rule was previously in effect but was replaced by DOL guidance in 2018.
The 2018 guidance provided that employers could claim the tip credit if non-tipped duties were performed at the same time as tipped duties, or if the non-tipped duties were per- formed for a reasonable time before or after tipped duties. This new proposal returns to the 80/20 rule. In addition, the new proposal specifies that, if an employee performs non-tipped activi- ties for 30 minutes in a row, the employer cannot pay the employee the lower tipped hourly wage for that time.
For employers with tipped workers that are subject to federal wage-and-hour law, this pro- posal is a good reminder that they need to pay attention to these potential changes and their effects on how they compensate employees.
Caution on the Menu
Massachusetts has its own complex laws relat- ing to tips, minimum wage, and overtime. As a
Tips
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“The employee must not
make less than minimum wage when their tips and hourly wage are combined.”
mandatory treble (triple) dam- ages for violations of wage-and- hour laws relating to minimum wage, tips, and overtime. This means that, if an employer is found in violation of state law, at a minimum, for every dol- lar an employer does not pay
in accordance with wage-and- hour laws, that employer will have to pay three times that amount.
Under Massachusetts and federal law, employers are allowed to pay employees who
LUDWELL CHASE
AMY ROYAL
receive tips an hourly wage that is lower than the minimum wage. This works by allowing employ- ers to take a ‘tip credit’ for a certain amount
in tips that the employee earns. The employee must not make less than minimum wage when
their tips and hourly wage are combined. Under the federal law, the Federal Labor Standards
Act, all hourly workers must be paid the federal minimum wage of $7.25. Tipped workers may be directly paid $2.13 per hour if their tips and hour- ly wage combined are at least equal to the mini- mum wage. In other words, employers can claim a ‘tip credit’ of $5.12 per hour.
The U.S. Department of Labor (DOL) recently released new proposed regulations for tipped workers that reinstate the 80/20 rule. This rule limits the amount of time tipped workers can spend performing activities that are related to tip- generating duties, while their employers can still claim the tip credit. Tipped workers must spend at least 80% of their time performing directly tip-
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