Paper Trails

Maine updates tip pooling laws

Attention employers with tipped employees! Maine legislatures have signed a new law, making a change to how tip pooling works.  Let’s take a look at the new tip pooling laws in Maine.

What is tip pooling?

Businesses with employees who customarily receive tips may decide to “pool” all tips together and divide them among employees, even if a certain employee didn’t solely produce the work that garnered the tip.  Tips may be divided among all staff or only certain staff.  For example, five employees working the morning shift in a coffee shop may split all of the tips made during that shift evenly among the five of them.  Another example would be valets.  Three valets may pool all of the tips made during the evening shift and split them three ways.  Pooled tips may be divided evenly or calculated based on number of hours worked per employee.

Under Maine law, employers must make employees aware of tip pooling arrangements in advance.  In addition, employees can’t be required to pay more into the pool than is customary and reasonable, and the employee must be able to keep at least the full minimum wage.

What are the changes to Maine’s tip pooling laws?

L.D. 903, signed on June 15th, makes changes to Maine’s tips pooling laws.  Maine will now allow non-tipped employees to participate in tip pools when all the participating employees are being paid the minimum hourly wage and the employer does not use the FICA tip credit.  Previously, only service (tipped) employees were allowed to participate in the tip pool.  Employers can still choose to allow only tipped employees to participate in tip pools and use the FICA tip credit in that instance.  So the two scenarios are:

  1. All employees participate in the tip pool and everyone must be paid at least full minimum wage ($13.80 for 2023), or
  2. Tipped employees participate in the pool and can be paid at least the tipped minimum wage ($6.90 in 2023).

In either instance employers, managers, and supervisors are still not eligible to participate in the tip pooling. Further, they cannot retain any portion of tips that other employees have earned. Employers, managers, and supervisors are allowed to contribute tips to the tip pool.

Employers, managers, and supervisors are only allowed to retain the tips that they “solely and directly” earned by performing tipped related work. According to the DOL, a manager or supervisor is considered anyone:

  1. whose primary duty is the management of the entire enterprise, a subdivision, or a department.
  2. who regularly directs the work of at least two other employees.
  3. who has the right to hire or fire other employees.

This update will go in effect on the 91st day after the state’s current special legislative session adjourns.  Be sure your policies about tipping are following these changes to the law.  Feel free to contact us if you need assistance with remaining in compliance with your tipped employees.