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July 2022: Rhode Island Enacts Tip Law, Mirroring Aspects of the FLSA

21 Jul


Update Applicable to:
All employers of tipped employees in the state of Rhode Island.

What happened?
On June 28, 2022, Governor McKee signed House Bill 7510 (HB 7510) into law, which mirrors nearly all tip-related aspects of the federal Fair Labor Standards Act (FLSA) and its regulations.

What are the details?
Effective immediately, the new protection statute applies to “tipped employees,” any employees “engaged in an occupation in which the employee customarily and regularly” receive more than $30 per month in tips.

The tip protection statute first makes clear that tips are the sole property of the tipped employee.  Employers cannot take “any part” of a tip from an employee.  The only exception is for credit card processing fee deductions, which may be taken from an employee’s tips if the employer notifies the employee of the deduction, and the amount does not bring the employee below minimum wage.  Tips also must be paid no later than the regular payday; tips cannot be withheld because the employer is waiting for disbursement from a credit card company.

The statute also outlines requirements for a valid tip pool.  A tip pool can be established among employees “who customarily and regularly receive tips,” so long as the employer:

  1. Notifies the employees of the tip pool contribution amounts;
  • Only takes a tip credit for the amount received by each employee; and
  • Does not take any part of the tips for itself (except for credit card processing fees). 

A tip pool can include employees who are not “tipped employees,” but only if the employer pays the full minimum wage and does not take any tip credit, and no exempt employees are included in the tip pool.  For instance, a restaurant could have a tip pool including all of its wait staff and pay them $3.89 per hour, but if it wanted to include back-of-house employees, such as cooks, it would need to pay the full minimum wage of $12.25. Employers cannot take “any part” of a tip from an employee.

For more information, please see the links below:

House Bill 7510 (HB 7510)

Article 1Article 2

What do employers need to do?
Employers should review the links provided above and should review their policies and practices to ensure:

  1. They are not retaining any portion of employees’ tips;
  2. Tip pooling arrangements comply with the requirements of the statute; and

Employees are properly notified about tip pooling or credit card deductions.

Need help understanding how changes to employment laws will affect your business?

Learn more about how Vensure's Rhode Island PEO services can help you navigate complex employment laws and keep your business compliant.

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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