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

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 1 – Article 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.