Mass-Peculiarities: An Employers Guide to Wage & Hour Law in the Bay State 2022 Edition

© 2022 Seyfarth Shaw LLP Massachusetts Wage & Hour Peculiarities, 2022 ed. | 135 for timely payment of wages [in the statute].” 771 As a practical matter, tips are usually cashed out daily, while proceeds from service charges are typically included in employee paychecks. E. The Tip Credit and Service Rate Both Massachusetts and federal law allow employers to pay a cash wage below minimum wage to customarily tipped employees if other statutory requirements are met. 772 Under Massachusetts law, an employer may elect to pay tipped employees the “service rate”—which, as of January 1, 2022, is $6.15 per hour. 773 In order to pay this lower rate, commonly referred to as “taking the tip credit,” the employees in question must be customarily tipped employees and the employer must provide proper notice. 774 To qualify as a “tipped employee,” one must customarily receive tips of more than $30.00 per month. 775 The combination of tips and the service rate earned by the employee must meet or exceed the Massachusetts minimum wage. 776 As of January 1, 2019, employers are expected to make this calculation at the completion of each shift worked by an employee. 777 If the combination of an employee’s service rate and tips at the end of a given shift do not meet the 771 M.G.L. ch. 149, § 152A(e). 772 29 U.S.C. § 201 et seq .; M.G.L. ch. 151, § 7. 773 M.G.L. ch. 151, § 7, as amended by St . 2018, ch. 121, § 22. The minimum “service rate” for eligible customarily t ipped employees will increase to $6.75 per hour by 2023. St . 2018, ch. 121, §§ 22-26. Under federal law, employers may take a “ t ip credit” against the minimum wage when an employee earns enough t ips to make up the difference between the lower rate and the standard minimum wage. 29 U.S.C. § 203(m). There has been some ambiguity as to whether employers may pay the sub- minimum wage t ip credit to employees who spend some port ion of their working t ime performing “general preparation and maintenance dut ies.” Some federal appellate court s have held that where an employee spends more than 20 percent of his or her t ime performing preparat ion andmaintenance dut ies, the employer cannot pay the employee the sub-minimum wage t ip credit . See , e.g. , Marsh v. J. Alexander's LLC , 905 F.3d 610, 630 (9th Cir. 2018); Driver v. AppleIllinois, LLC , 739 F.3d 1073, 1075 (7th Cir. 2014) (“as long as the t ipped employee spends no more than 20 percent of his workday doing non-t ippedwork related to his t ippedwork . . ., the employer doesn’t have to pay the full minimum wage (that is, the minimum wage without the t ip credit ) for the t ime the employee spends doing that work”); Fast v. Applebee’s Int’l, Inc. , 638 F.3d 872, 880-81 (8th Cir. 2011), cert. denied , 2012 U.S. LEXIS 709 (Jan. 12, 2012). However, on November 8, 2018, the DOL issued an Opinion Let ter rescinding the so- called “20 percent rule.” DOL Wage & Hour Opinion Let ter FLSA 2018-27 (Nov. 8, 2018). In addit ion, federal regulat ions require that employers disclose specific informat ion about their use of the t ip credit . See 29 C.F.R. § 531.59 (“ [A]n employer is not eligible to take the t ip credit unless it has informed it s t ipped employees in advance of the employer’s use of the t ip credit of . . . [t ]he amount of the cash wage that is to be paid to the t ipped employee by the employer; the addit ional amount by which the wages of the t ipped employee are increased on account of the t ip credit claimed by the employer, which amount may not exceed the value of the t ips actually received by the employee; that all t ips received by the t ipped employee must be retained by the employee except for a valid t ip pooling arrangement limited to employees who customarily and regularly receive t ips; and that the t ip credit shall not apply to any employee who has not been informed of these requirement s in this sect ion.”). 774 See 454 C.M.R. § 27.03(2). 775 29 U.S.C. § 203(t ). Massachuset t s defines “ t ipped employees” as those receivingmore than $20.00 in t ips each month. 454 C.M.R. § 27.02. Under federal law, employees must receive more than $30.00 in t ips each month, effectively making this the requirement . 29 U.S.C. § 203(t ). The DLShas opined that “newly-hired employees who do not receive t ips during their init ial t raining period are not ‘t ipped employees’” and therefore must be paid at least minimum wage during their t raining period. DLS Opinion Let ter MW-2003-012 (Nov. 24, 2003). 776 M.G.L. ch. 151, § 1; 454 C.M.R. § 27.02. 777 M.G.L. ch. 151, § 7, as amended by St . 2018, ch. 121, § 27.