State of Vermont [telephone] 802-828-4344

Department of Labor [fax] 802-828-4248

5 Green Mountain Drive

P.O. Box 488

Montpelier, VT 05601

labor.vermont.gov

"service or tipped" employees. The following information will provide employers and employees guidance regarding the

rules related to "service or tipped" employees.

DEFINITION OF A “SERVICE OR TIPPED” EMPLOYEE: As of July 1, 2017, a "service or tipped employee" means an

employee of a hotel, motel, tourist place, or restaurant who customarily and regularly receives more than $120.00 per

month in tips for direct and personal customer service. If an employee does not regularly receive more than $120.00 per

month in tips, the employee shall be paid an hourly wage equal to or exceeding the minimum wage rate.

BASIC WAGE RATE: Effective January 1, 2019 and each subsequent January thereafter, the basic wage rate will

increase the same percentage amount as the minimum wage rate, using the Consumer Price Index (CPI), not seasonally

adjusted, city average, or 5%, whichever is smaller. The current basic wage rate for "service or tipped" employees is

indicated on the VDOL’s minimum wage poster.

3) that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped

employee;

4) that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling

arrangement limited to employees who customarily receive tips; and

5) that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip

credit provisions.

If a service or tipped employee does not earn enough tips in a workweek to make up the full tip credit, the employer is

required to make up the difference. Below is an example of where an employer has paid the minimum basic wage rate and

the difference the employer would be required to make up if the tips received did not result in the hourly wage equal or

exceeding the current minimum wage. PLEASE NOTE: As of 1/1/19, the basic wage rate is $5.39 and the minimum

Employee earns tips of $50.00 .................................................................................................................. $50.00

Total paid thus far to employee................................................................................................................... $157.80

Minimum wage is $10.78 for 20 hours worked ........................................................................................ $215.60

Employer would subtract out amount already paid ................................................................................... $157.80)

Employer would be required to pay ...................................................................................................... $57.80 **

**This ensures the employee has received the minimum wage amount for ALL hours worked.

The employer shall preserve all such reports submitted by the employee for a period of three years. These records

employer and the employee reallocating any part of the employee's tips to the employer.

TIP POOLING: Tip pooling or sharing arrangements are permissible under certain circumstances. The FLSA does

not impose a maximum contribution amount or percentage on valid mandatory tip pools. To be valid, a tip pooling

arrangement must:

1) Notify tipped employees of any required tip pool contribution amount;

2) only take a tip credit for the amount of tips each tipped employee ultimately receives;

3) not require an employee who receives tips to contribute more than is customary and reasonable; and

4) only permit sharing or pooling of tips amongst employees who customarily and regularly receive tips, unless full

minimum wage is paid and no tip credit is taken.

The FLSA has specific guidelines around who may or may not participate in a valid tip pool if a tip credit is taken.

when a customer pays the tip with a credit card. The employee must still be paid at least the minimum wage after the

processing fee is deducted. When used, it is advisable to notify employees of this practice, either through an employee

handbook or written memo.

TIME SPENT IN NON-TIPPED DUTIES: 29 C.F.R. § 531.56(e) allows employers to take the tip credit for time spent in

duties related to the tipped occupation, even though the duties are not directly producing tips. For example, a

waiter/waitress who spends time cleaning and setting tables, making coffee, or occasionally washing dishes or glasses

may be considered to be engaged in the tipped occupation even though the duties are not producing tips. However, if the

tipped employee is spending a substantial amount of time (in excess of 20%) performing non-tipped duties, no tip credit

may be taken.

TIPS MUST BE INCLUDED AS WAGES PAID: 21 V.S.A. §1301 (12) includes tips as "wages" reportable on the C-101