As a customer will leave cash on the table in the form of tips, there is the absence of any processing fee. The worker can go ahead with accepting the tip directly. Usually speaking, the person who was actually serving the table is only allowed to take the tip. However, there are specific cases wherein the worker might be a part of the ‘tip pool.’ In this case, the tip amount is usually split between eligible workers.
Still, most individuals out there prefer paying the entire amount -including the tip, with the help of the credit cards. The concept of leaving tips with the help of the credit cards have become quite common lately. In such a case, businesses are expected to pay processing fees any time they will be running a credit card.
To avoid such fees on tips paid with credit cards, some employers go ahead with deducting the existing fee from the amount that will eventually go to the respective employees. Ultimately, the employer is expected to pay the respective tips out. This is because employees are not able to collect them directly -like in the form of cash. Is the process of deducting fees considered legal?
Understanding Deduction of Fees Out of Tips
Credit card processing fees are known to consume a significant portion of the bottom lines of the restaurant businesses. As owners continue looking for lucrative ways to minimize expenses, most think about whether or not it is legal to deduct the overall costs of credit card processing fees out of the tips of the respective servers.
As per the general rule, it can be said that it is a legal procedure. The only exception is in the case of prohibitions imposed by specific local laws or states.
Currently, the states that have put prohibitions on the deductions related to processing fees out of tips at restaurants are Maine, California, and Massachusetts. In some states, the laws are still not clear -including Kentucky, Montana, and Delaware.
In each of the subsequent states, existing laws with respect to tips do not particularly address deductions related to credit card processing fees. However, these laws indeed include stipulations that gratuities will ultimately belong to the employees. It is still not clear whether or not courts will rule in the favor of employees or businesses in the given states.
What is the Issue Regarding Tips Paid with Credit Cards?
Restaurant owners tend to have a valid issue with regard to payments paid with credit cards. Fees with respect to credit card processing eat into a major portion of the profits of businesses. Some owners aim at offsetting the existing expenses by deducting money out of server tips that are paid with the help of credit cards.
Even in the states wherein it is legal to deduct money out of tips paid through a credit card, there are specific rules to follow. Some of the pointers of these rules are:
- Your employer is not able to deduct the expense of processing the gratuity part of the bill from the respective tip
- Your employer is not able to deduce the expense of processing the entire bill out of the tip
This tends to limit the available options for the employers. As per the Fair Labor Standards Act -the federal law regulating the action, the employer is capable of deducting only the processing percentage out of the tip.
What are the Alternatives Available with Restaurants?
While there is no denying the fact that restaurant owners remain under great pressure of keeping businesses solvent as well as prosperous, still they are able to use the same in the form of excuse when it comes to exploiting or cheating workers. There are some small-scale business owners that might be naturally greedy and feel that they are entitled to execute anything to achieve maximum profits.
In case an employer puts forth the argument that the respective credit card processing fees are quite high and they are going to deduct money out of the tips offered by customers, employees can go ahead with assisting in solving the problem. It can be done by highlighting that they are paying significantly for the credit card processing fees initially. Before employers will take money from the tips of the employees, the restaurant owner should consider shopping around for the most affordable service provider.
It is a no-brainer. It is the first thing that any restaurant owner should implement. If the employer will ultimately refuse the suggestion of the employees or go ahead with making excuses for why they are not able to switch or search for a competitive provider of credit card processing, employees can get suspicious. They might think of enjoying some major financial advantage with the service provider they work in collaboration with.
What are the Further Actions Taken by Restaurant Owners?
As an employee, if you have tried reasoning with the respective employers about the rights and laws with respect to tips by credit card and they go ahead with the deductions, you can think of directing them to the concerning California laws dealing with the matter.
It should not come as a surprise in case the employer is not aware of the laws that govern restaurant tips. Most owners possess only little knowledge of the laws with respect to working conditions and wages. They are only aware of setting wages, establishing rules with respect to meal and rest breaks, and adhering to overtime regulations. They might not even believe that there is the presence of any such law that will forbid them from deducting money from the tips out of credit cards. As the employee, if you have highlighted laws that deal with the given matter and business owners still continue deducting money, then you are expected to handle the situation on legal grounds. The first step, in this case, should be reaching out to a lawyer.
How to Protect Rights as the Employee?
It can be a daunting situation to go up and take any action against the business owner. Still, as an employee, you should not be hesitant in reaching out to the restaurant owner to discuss matters. As a matter of fact, there are minimal chances that only you are not treated properly with respect to tips on credit cards. Your colleagues might also be experiencing deductions due to the existing practice.
The professional lawyer you might hire for the unlawful practice in your workplace will be positioned to commence the engagement in the given case. However, there might be a possibility that your colleagues might already be taking some legal action. If you come across strength in the overall numbers, it will get easier for tipped employees to reach out to the employers and provide relevant evidence.
One aspect to keep in mind is that you should not aim at amending the will of the respective employers on your own. At the same time, you should also not attempt at settling with them without any legal notice. Once you have managed to settle the dispute within the domains of the legal realm, it is regarded as the best solution to leave legal matters completely in the hands of the lawyers. Important matters like negotiation and communication with the respective restaurant owners should be handled only by lawyers.
This practice is illegal in the state of California. There is prohibition on an employee getting terminated for raising matters about the respective worker rights. In case your employer goes ahead with demoting or firing you, they will only be increasing the overall legal troubles. In case you are witnessing problems with the employer or restaurant owner, you should consider reaching out to a professional lawyer to help in obtaining justice and compensation. You can go ahead with filing a lawsuit for the wrongful termination along with the one you have already filed for illegally deducting money from the tips. This could lead to ensuring damages in the form of emotional distress and back payments.
As a worker, if you feel that your rights are getting violated, you should take ample time to look into the available legal options. Wage theft turns out to be a major concern for most industry verticals out there. Therefore, it should be challenged properly.