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Sep 5, 2024
7:32:57am
mbs6 Playmaker
Under the federal, Fair Labor Standards Act, employers can't do this.
It's unlikely, in my mind, that any state has a law overriding the FLSA on this matter. As cited by someone above, the employer may be allowed to engage in tip-pooling, but the tips still go to the employees. Tips are considered essentially a gift from a customer, over which the employer does not exert control. It might be important to note there is a legal difference between a "tip" and a mandated "service charge".

The reason to mention this to the employer, is to give them a chance to reform their practices before a disgruntled, possibly former employee decides to "turn them in" to the State. Many states will come down hard on such employers, even without legal representation by the employees. This could result in the employer having to:

1). Recreate the amount of the tips that were unpaid. This could be super time consuming and maybe nearly impossible.
2). Pay those amounts and possibly some additional wage penalties to current and former employees.
3). Amend their payroll tax returns to include the tip income.
4). Pay the taxes they should've paid on the tips.
5). Pay late tax-deposit fees.
6). If it goes far enough back, they may have to issue Forms W-2c to each affected employee, which would technically mean the employees should file Forms 1040-X to amend their personal tax returns. Employees could claim the employer should bear the cost of amendment.

mbs6
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mbs6
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Sep 5, 8:20am

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