[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR531.55]

[Page 172-173]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 531_WAGE PAYMENTS UNDER THE FAIR LABOR STANDARDS ACT OF 1938
--Table of Contents
 
                        Subpart C_Interpretations
 
Sec. 531.55  Examples of amounts not received as tips.

    (a) A compulsory charge for service, such as 10 percent of the 
amount of the bill, imposed on a customer by an employer's 
establishment, is not a tip and, even if distributed by the employer to 
his employees, cannot be counted as a tip received in applying the 
provisions of section 3(m) and 3(t). Similarly, where negotiations 
between a hotel and a customer for banquet facilities include amounts 
for distribution to employees of the hotel, the amounts so distributed 
are not counted as tips received. Likewise, where the employment 
agreement is such that amounts presented by customers as tips belong to 
the employer and must be credited or turned over to him, the employee is 
in effect collecting for his employer additional income from the 
operations of the latter's establishment. Even though such amounts are 
not collected by imposition of any compulsory charge on the customer, 
plainly the employee is not receiving tips within the meaning of section 
3(m) and 3(t). The amounts received from customers are the employer's 
property, not his, and do not constitute tip income to the employee.
    (b) As stated above, service charges and other similar sums which 
become part of the employer's gross receipts are not tips for the 
purposes of the Act. However, where such sums are distributed by the 
employer to his employees, they may be used in their entirety to

[[Page 173]]

satisfy the monetary requirements of the Act. Also, if pursuant to an 
employment agreement the tips received by an employee must be credited 
or turned over to the employer, such sums may, after receipt by the 
employer, be used by the employer to satisfy the monetary requirements 
of the Act. In such instances, there is no applicability of the 50-
percent limitation on tip credits provided by section 3(m).