Gratuity Issue

[cvcv07]

What is the name of your state? Ohio

I currently work as a limousine driver. When clients call my company to make reservations, the rate they are provided includes a 20% gratuity. That 20% gratuity is KEPT by the company and not given to me. I work on an hourly basis ($7.50 per hour). Time and time again, upon reaching the agreed to destination, my passengers will ask: "Now am I correct in assuming that your gratuity has already been collected in my bill?"

I've been instructed to say, "Yes, the gratuity has already been included in your bill."

I feel this is a deceptive practice on my company's behalf, as most of my passengers assume that the 20% gratuity will be given to me and NOT kept by my company. Is this action fair and legal?

I'll be anxious to receive your feedback on this issue. Thank you for your time and energy.

 

[ArmyRetCW3]

Under federal labor laws (FLSA) in Field Operations Handbook (FOH) § 30d03 explains, a compulsory service charge is not considered a tip. Thus, the employer must pay the entire minimum wage and overtime requirement unless enough bona fide tips are received to qualify the employee as a tipped employee. Therefore, the “imposed gratuity” is not a tip under the FLSA. Thus, no tip credit is allowed for amounts received as an imposed gratuity and the employer must pay the entire minimum wage and overtime as required by the FLSA. Additionally, "if such service charges to customers are compulsory they are not tip income…, but are gross receipts to the employer.”

Ref: 9/2/2005 FLSA #2005-31

 

[ecmst12]

What that means is, as long as the company is claiming it as their income and not your wages on their taxes, then it's legal, if not honest.