Requirements relating to retention and pooling of tips

(a) Treatment of certain amounts as tips Section 3(m)(2) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)) is amended— (1) by redesignating subparagraphs (A) and (B) as subparagraphs (B) and (C), respectively; and (2) by inserting before subparagraph (A), as so redesignated, the following: (A) Tip includes any discretionary amount paid directly to an employee by a customer and any portion of a mandatory charge imposed on a customer by the employer which is added to the cost of the product or service in any manner that may reasonably lead the customer to believe that the amount collected by the employer from such charge will be paid in full directly to the employee.. (b) All tips retained by employees Subparagraph (B) of section 3(m)(2) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)), as redesignated by subsection (a), is amended by striking of this subsection and all that follows through the end of the subparagraph and inserting of this subsection. Any employee shall have the right to retain, regardless of whether received as part of a system to pool tips established in accordance with subparagraph (C), any tips received by such employee.. (c) No tips retained by employers Subparagraph (C) of section 3(m)(2)(C) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)), as redesignated by subsection (b), is amended to read as follows: (C) (i) Regardless of whether or not an employer takes a tip credit, the employer may not keep tips received by its employees for any purpose or use such tips for any purpose other than to facilitate the distribution to employees of the full amount of all such tips under a system to pool tips established in accordance with subparagraph (D). (ii) A violation of clause (i) includes— (I) allowing managers or supervisors to keep or use any portion of employees’ tips; and (II) keeping or using any portion of employees’ tips to cover the cost of financial transaction fees, including any fee established, charged, or received by a payment card network for the purpose of compensating an issuer for its involvement in a transaction in which a person uses a debit card or credit card (as the terms “debit card”, “credit card”, “issuer”, and “payment card network” are defined in section 921(c) of the Electronic Fund Transfer Act (15 U.S.C. 1693o–2(c))). (d) Tip pools Section 3(m)(2) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)), as amended by this section, is further amended by adding at the end the following: (D) (i) In any case in which an employer is provided with written documentation demonstrating that not less than 30 percent of all of the non-supervisory employees of the employer request a vote on whether to establish or modify a system to pool tips in accordance with this subparagraph, such a system shall be considered to be so established or modified if the employer is provided with written documentation demonstrating that not less than 51 percent of all such employees vote in favor of establishing or modifying such a system. (ii) The employer shall maintain a written record of any vote to establish or modify a system to pool tips held pursuant to this subparagraph, including the name of each employee voting and the vote totals. The employer shall provide a copy of such record to any employee upon request. (iii) (I) A system to pool tips established under this subparagraph shall be administered by the employer, at the employer’s expense, in a manner ensuring that— (aa) participation in the system is voluntary for each employee and determined without coercion from the employer; (bb) such tips are shared among all non-supervisory employees participating in such system; (cc) funds held in such system are maintained separately from any other funds; and (dd) the records of such system are available to be examined by each such participating employee. (II) In administering a system to pool tips established under this subparagraph, an employer may suggest reasonable and customary practices. (III) In any dispute among employees relating to the administration of a system to pool tips established under this subparagraph, the employer may mediate and impose a resolution of the dispute on the employees participating in the system only if— (aa) in the case of employees in a restaurant or similar retail food establishment, no agreement resolving the dispute can be reached among— (AA) 50 percent or more of the participating service employees whose primary job duties include direct interaction with customers; and (BB) 50 percent or more of all other participating employees; and (bb) in the case of employees in any other establishment, no agreement resolving the dispute can be reached among 50 percent or more of the participating employees. (iv) An employer shall not be required to compensate any employee participating in a system to pool tips established under this subparagraph in any case arising as a result of another participating employee withholding tips from such system. (v) An employer shall not discharge an employee or otherwise discriminate against an employee based on the employee’s vote with respect to, or participation in, a system to pool tips established under this subparagraph. (vi) In this subparagraph, the term non-supervisory employee means any employee who has, at any point in their typical duties, decision making authority over the scheduling of other employees, the hiring of other employees, or the termination of other employees.. (e) Service charges Section 3(m)(2) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)), as amended by this section, is further amended by adding at the end the following: (E) (i) In any case in which an employer imposes a mandatory charge on a customer which is added to the cost of the product or service, the employer shall— (I) disclose to the customer and to all employees involved in the sale of such product or delivery of such service— (aa) the reason for such charge; and (bb) the portion of such charge, if any, which upon its collection will be paid in full by the employer directly to employees; and (II) promptly pay to employees upon collection of such charge any portion identified in the disclosure required under subclause (I)(bb). (ii) In any case in which an employer represents that a charge is payable at the discretion of the customer, the employer may not add such charge to the cost of any product or service unless first requested by the customer.. (f) Penalties Section 16(e)(2) of the Fair Labor Standards Act of 1938 (29 U.S.C. 216(e)(2)) is amended— (1) by striking section 3(m)(2)(B) and inserting any provision of section 3(m)(2); and (2) by inserting or used after kept. (g) Effective date The amendments made by this section shall take effect on the date of enactment of this Act and shall apply with respect to all tips received on or after such date.