Employer Who Elects to Use Tip Credit Must Inform Affected Employees

A new law in Maine restores the tip credit to the state's minimum wage law. Key provisions of the law are presented below.

Tip Credit Restoration
Under the new law, an employer may consider tips as part of the wages of a service employee, but such a tip credit may not exceed 50% of the minimum hourly wage established under state law except that from January 1, 2017 to December 31, 2017, the minimum cash wage paid directly to a tipped service employee may not be less than $5.00 per hour.

An employer who elects to use the tip credit must inform the affected employee in advance (as provided below), and must be able to show that the employee receives at least the minimum hourly wage when direct wages and the tip credit are combined within the established 7-day workweek.

Note: The employer may not deduct any amount from employee tips charged to a credit card, including (but not limited to) service fees assessed to the employer in connection with the credit card transaction.

Tip Credit Notice Requirements
An employer who elects to use the tip credit must inform the affected employee in advance, either orally or in writing, of the following information:

• The amount of the direct wage to be paid by the employer to the tipped employee;
• The amount of tips to be credited as wages toward the minimum wage;
• That the amount of tips to be credited as wages may not exceed the value of the tips actually received by the employee;
• That all tips received by the affected employee must be retained by the employee, except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips in accordance with state law (subsection 2-A);
• That the tip credit may not apply to any employee who has not been informed by the employer of the provisions for a tip credit; and
• If the employer uses a tip pooling arrangement, any required tip pool contribution amount from the employee.

Effect on Other Provisions
The new law eliminates a requirement that the tip credit may not exceed the difference between the minimum cash wage paid directly to a tipped service employee and the minimum hourly wage established under state law (subsection 1).

Additionally, the new law eliminates a provision that, starting January 1, 2018 (and on each January 1st thereafter) would have required the minimum cash wage paid directly to a tipped service employee to be increased by an additional $1.00 per hour until it reached the same amount as the annually adjusted minimum hourly wage established under state law (except that if the minimum cash wage paid directly to a tipped service employee was less than $1.00 less than the annually adjusted minimum hourly wage, it would have been required to be increased by that lesser amount). These requirements are eliminated under the new law.

Click here to read the text of the new law. The new law is effective 90 days after the adjournment of the 128th Maine Legislature, First Regular Session. Click here for updates regarding adjournment. Affected employers with questions about the law's impact on workplace policies and practices should contact a knowledgeable employment law attorney.

Preferred Partner of