Update to Tip Pooling Notice Requirements in Colorado
Starting August 2, 2019, Colorado businesses that require or administer tip pools for employees must comply with new notice requirements.FN1 Colorado businesses that pool tips previously were required to post a conspicuous notice on a printed card stating that tips given to employees belonged to the employer, rather than the employee.FN2 Under a May 2019 bill, employers must notify customers on menus, table tents, or receipts that tips are shared by employees, and are no longer required to say pooled tips “belong to the employer.”
Under current law, Colorado employers that allow or require tip pools:
May pay the tipped minimum wage (at least $8.08 per hour in Colorado) for employees who participate in a tip pool if the tip pool is confined to employees who are customarily and regularly tipped.FN3
May open up the tip pool to employees who are not customarily and regularly tipped (such as cooks and dish-washers), so long as all employees in the tip pool are paid the full minimum wage, and not the tipped minimum wage.FN4
May not include managers or supervisors in the tip pool.FN5
Generally should not deduct credit card processing fees from tipped employee wages.FN6
Employers with tip pooling arrangements should look at their notice practices in light of the new requirements.
Footnotes:
FN1: HB 19-1254, see https://leg.colorado.gov/sites/default/files/2019a_1254_signed.pdf
FN2: See C.R.S. § 8-4-103(6). The previous required language was an anomaly because it conflicted with federal law stating tips belong to the employee. See 29 U.S.C. § 203(m)(2)(B).
FN3: See 29 U.S.C. § 203(m)(2)(A)(ii).
FN4: U.S. Department of Labor Field Assistance Bulletin No. 2018-3, https://www.dol.gov/whd/FieldBulletins/fab2018_3.pdf.
FN5: This assumes the establishment is covered by the federal Fair Labor Standards Act (“FLSA”). Under federal law, employers may not require employees to share tips with managers or supervisors regardless of whether the employer takes a tip credit. See U.S. Department of Labor Field Assistance Bulletin No. 2018-3, https://www.dol.gov/whd/FieldBulletins/fab2018_3.pdf. Under Colorado law, employer-required sharing of tips with employees who do not regularly receive tips (such as managers or food preparers) nullifies allowable tip credits. Colorado Minimum Wage Order No. 35, 7 CCR 1103-1, https://www.colorado.gov/pacific/sites/default/files/7%20CCR%201103-1%20Minimum%20Wage%20Order%2035.pdf.
FN6: Colorado Minimum Wage Order No. 35, 7 CCR 1103-1, https://www.colorado.gov/pacific/sites/default/files/7%20CCR%201103-1%20Minimum%20Wage%20Order%2035.pdf. Colorado law does not prohibit deducting credit card processing fees so long as the employer pays the full minimum wage for such tipped employees.