Seattle Minimum Wage Guide: More on Tips

Seattle Minimum Wage Guide: More on Tips
Almost daily, new stories are coming out about how restaurants are handling tipping in Seattle. Some restaurants have done away with tipping altogether. While there is no set way regarding how a restaurant should handle this issue, there are legal requirements that you should know.

Parts of the Seattle Minimum Wage Ordinance that apply to tips are complicated, but as we’ve stated in previous editions, the WRA commissioned a legal analysis to guide you as you navigate this issue in your restaurant. You can see it here: Minimum Wage Ordinance Guide (MWG.) You can find our first post on tipping and the Seattle Minimum Wage Ordinance here.

There are benefits of understanding what the requirements are surrounding tips. According to the analysis:

“Per the FAQ D(9)(c), an employee’s tips can be averaged over a pay period in applying them towards the difference between minimum wage and minimum compensation (again, for employees who work in both tipped and non-tipped positions, this is only for time spent working in a tipped position).” Page 22.

However,

“While the FAQs allow averaging of tips over a pay period, it’s recommended to average tips over the workweek instead. Minimum wage and overtime laws are typically applied on the workweek basis. Therefore, averaging tips over the workweek will be more consistent with other wage and hour laws, will be less confusing, and will be less likely to be viewed as a violation of other laws (e.g., state / federal overtime laws).

When it comes to factoring in tips, the difference between Schedule 1 and Schedule 2 employers is important. Determine which type of employer you are here. According to the Seattle Office for Civil Rights,

“An employer determines schedule size by calculating the average number of employees employed (i.e. paid) each calendar week during the prior calendar year. An employer should include any week during which at least one employee worked. Employers should not include weeks where no employees worked. All employees in the United States are counted, including:

  • Full-time employees.
  • Part-time employees.
  • Temporary or seasonal employees.
  • Jointly-employed employees.
  • All employees of the franchise or a network of franchises in the United States.

Applying tips towards the minimum compensation can create complications in calculating the employee’s overtime rate of pay. You can read an example of how to do the breakdown here. (Check out page 11 of the MWG for overtime calculation rules).

Additionally, you should keep your payroll records for at least three years. Tips that demonstrate the payment of minimum wages and minimum compensation to each employee must be included. (See page 11 of the MWG).

Finally, if you are going to count tips in the wage calculation you must provide written notice to your employees that contains certain information or have a poster on display that details this information. You can get a breakdown of that information on pages 26 and 27 of the MWG. Or, you can use these sample letters as a guide:

– Sample letter: Current Tipped Employees 
– Sample letter: Tipped Employees At Time of Hire

We realize implementation of the new Seattle Minimum Wage ordinance can be intimidating and confusing. If you have any questions about what you should, or should not, do we’re here to be your resource. You can call us anytime (360) 956-7279.