HOUSE OF REPRESENTATIVES

150th GENERAL ASSEMBLY

HOUSE BILL NO. 251

AN ACT TO AMEND TITLE 19 OF THE DELAWARE CODE RELATING TO THE DELAWARE MINIMUM WAGE FOR EMPLOYEES THAT RECEIVE TIPS OR GRATUITIES.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Chapter 9, Title 19 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows and by redesignating accordingly:

§ 902 Minimum wage rate (For current federal minimum wage, see 29 U.S.C. § 206(a)(1)(A))

(b)  Gratuities received by employees engaged in occupations in which gratuities customarily constitute part of the remuneration may be considered wages for purposes of this chapter in an amount equal to the tip credit percentage, as set by the federal government as of June 15, 2006, of the minimum rate as set forth in subsection (a) of this section. In no event shall the minimum rate, under this subsection, be less than $2.23 per hour. [Reserved].

(c) For purposes of this section:

(1) An employee engaged in an occupation in which tips or gratuities customarily constitute part of the remuneration shall be any worker engaged in an occupation in which workers customarily and regularly receive more than $30 50% of their income from employment at the employer’s place of business per month in tips or gratuities. The occupation in question must involve direct receipt of tips or gratuities from a customer, not from a tip pool or other intervening mechanism distributing tips or gratuities.

(2) " Tips or Gratuities" means monetary contributions received directly or indirectly by an employee from a guest, patron or customer for services rendered where the customer is entirely free to determine whether to make any payment at all and, if so, the amount.

(3) A "primary direct service employee" is one who in a given situation performs the main direct service for a customer and is to be considered the recipient of the tip or gratuity.

(d)(1)  Any gratuity received by an employee, indicated on any receipt as a gratuity, or deposited in or about a place of business for direct services rendered by an employee is the sole property of the primary direct service employee and may not be taken or retained by the employer except as required by state or federal law. The tips or gratuities received by a service employee become the property of the employee and may not be shared with the employer. Tips or gratuities that are automatically included in the customer's bill or that are charged to a credit card must be treated like tips or gratuities given to the service employee. A tip or gratuity that is charged to a credit card must be paid by the employer to the employee by the next regular payday and may not be held while the employer is awaiting reimbursement from a credit card company. The employer may not deduct any amount from employee tips or gratuities charged to a credit card, including, but not limited to, service fees assessed to the employer in connection with the credit card transaction.

(2) Employees may establish a system for the sharing or pooling of tips or gratuities among direct service employees, provided that the employer shall not in any fashion require or coerce employees to agree upon such a system. Where more than 1 direct service employee provides personal service to the same customer from whom gratuities are received, the employer may require that such employees establish a tip or gratuity pooling or sharing system not to exceed 15% of the primary direct service employee's gratuities. The employer shall not, under any circumstances, receive any portion of the tips or gratuities received by the employees.

(3) The Department may require the employer to pay restitution if the employer diverts any tips or gratuities of its employees in the amount of the tips or gratuities diverted. If the records maintained by the employer do not provide sufficient information to determine the exact amount of tips or gratuities diverted, the Department may make a determination of tips or gratuities diverted based on available evidence.

(e) An employer who elects to use the tip or gratuity credit must inform the affected employee in advance, either orally or in writing, of the following information:

(1) The amount of the direct wage to be paid by the employer to the employee that was tipped or given gratuity ;

(2) The amount of tips or gratuities to be credited as wages toward the minimum wage;

(3) That the amount of tips or gratuities to be credited as wages may not exceed the value of the tips or gratuities actually received by the employee;

(4) That all tips or gratuities 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 or gratuities in accordance with subsection (c)(1);

(5) That the tip or gratuity credit may not apply to any employee who has not been informed by the employer of the provisions for a tip or gratuity credit; and

(6) If the employer uses a tip or gratuity pooling arrangement, any required tip or gratuity pool contribution amount from the employee and an assurance from the employer that the tip or gratuity pool contribution will not be used to offset the employer’s statutory obligations to pay the minimum wage to other employees.

(f) Every employer shall keep accurate records of all tips or gratuities received by that employer, whether received directly from the employee or indirectly by means of deductions from the wages of the employee or otherwise. Those records shall be open to inspection at all reasonable hours by the Department.

(g) Any employer who violates sections (d), (e), or (f) of this act shall be liable for a civil penalty in an amount not to exceed $1,000 for the first violation, $2,000 for the second violation, and $5,000 for each subsequent violation.

SYNOPSIS

This bill clarifies that the definition of employees who receive gratuities also includes employees that receive tips, that these employees must earn at least 50% of their income from tips or gratuities, and that the tips must come directly from customers not from tip pools or other similar intervening mechanism.

It also clarifies that tips automatically added to a bill or added to credit card charges are to be treated like tips or gratuity and must be paid by the employer directly to the employee at the next pay period as opposed to being held by the employer waiting to receive payment from the credit card company and that the employer may not deduct service fees from the employees tips or gratuities.

Lastly, this bill requires employers to give advance notice to its employees that receive tips or gratuities of: (1) the amount of the direct wage being paid to the employee; (2) the amount of tips or gratuities to be credited toward the minimum wage; (3) that all tips or gratuities must be retained by the employee, except for tip pools; (4) the tip or gratuity credit may not apply to any employee that did not receive the notice; (5) that the tip pool contribution will not be used to offset the employer’s statutory obligations to pay the minimum wage to other employees; and (6) that the employer must keep accurate records of all tips or gratuities received. If an employer does not provide this notice, the employer will be liable for a civil fine.