Dive Deep into Tipping Legalities in Washington

Restaurant owners across Washington State employ around a quarter of a million people, which represents the majority of the state’s hospitality industry. Understanding the rights of these workers is essential for businesses that want to comply with the law and attract top talent. That’s particularly true when it comes to tipping in Washington and how it impacts owners and employees.

Can owners take tips? How do tip pooling laws work? Answering these questions and more helps Washington restaurateurs run their businesses more fairly and efficiently.

Federal Minimum Wage & Tip Credits

A tip credit is where an employer can use an employee’s collected tips to make up part of their wage. They have to pay a base wage, which varies from state to state. Where the federal minimum wage (currently $7.25 per hour) is in force, the base cash pay per hour is $2.13. If the employee receives enough gratuities, the employer can decide that $5.12 an hour of the worker’s wage comes from those tips. 

However, this rule is not in force in Washington State. Washington restaurateurs cannot use tip credits. They must also pay the state minimum wage of $16.28 per hour, currently the second-highest minimum wage in the United States. The federal minimum wage only applies in states where there is no minimum wage. This is because employers must always pay the rate that provides the most benefits to the employee. 

So, to summarize, Washington restaurant owners cannot make use of tip credits and must ensure they pay all employees at least $16.28 an hour.

Tip Pooling & Sharing Regulations

Pooling all the tips received and then sharing them out among tipped employees is a common practice in many states. Tip pooling is also sometimes called tipping out. There are a few regulations around tip pooling in Washington:

• Employers must make sure workers know about any tip pooling before their first shift.
• Distributed tips cannot count towards wages.
• Tip pools must not include managers or business owners — although managers are allowed to keep tips given directly to them by customers.
• Employers are allowed to mandate a tip pool, i.e., require employees to take part.

Unlike most states, tip pools in Washington restaurants can include back-of-house staff such as kitchen workers.

Employees can also take part in voluntary tip sharing. Tip sharing in Washington doesn’t require any managerial involvement, but owners may volunteer to administer schemes to keep transactions fair and improve employee relations.

Tipping software is a way to take the complexity out of tip pooling, tip sharing, or any other aspect of managing tipped employees in Washington. One of the biggest advantages is that restaurant owners can arrange digital payouts that reach employees’ bank accounts automatically.

Mandatory Service Charges

It’s common to confuse service charges with gratuities or tips. A tip is always given freely by a customer in recognition of great service. The diner chooses the amount and who it goes to. So, what is a service charge? 

Service charges are added to a check by the restaurant manager or owner and represent an additional charge on top of the cost of the meal or drinks. These mandatory service charges are usually added for large groups, events, or special catering requirements. They are not a tip, and usually, employees have no right to them.

However, diners can easily confuse this service charge with a tip, believing that the money will go to the employee rather than the restaurant. In Washington State, the law requires that to mitigate this problem, receipts must clearly show who gets the service charge. If the disclosure is unclear or missing, the employee then has the right to claim that entire service charge. 

To avoid conflict over who has the right to service charges, restaurateurs should ensure bills and receipts are clear and accurate.

Credit Card Processing Fees

Many card payment systems and providers charge processing fees. The restaurant normally pays these fees rather than passing them onto the diner. In some states, it’s possible to take the fee out of the employee’s tips, which some owners might see as protecting the restaurant’s bottom line.

In Washington, that’s not legal. Employees are entitled to all their earned tips and don’t have to pay any portion of the card processing fees.

Protecting Tipped Workers’ Rights

Dealing with misconceptions about tipping in Washington head-on means you can cut through the complexities and ensure you’re getting it right for your business and your team. Regardless of what may happen in other states, there is no option for tip credit in Washington State, and tips can’t be used to cover any aspect of operational costs, including payment processing fees.

Tip pooling and tip sharing are both perfectly legal, and investing in the right software to manage these can protect your tipped workers’ rights while also making life easier for both you and them. 

You can find out more about tipping in Washington at the State Labor & Industries site or the U.S. Department of Labor (DoL) site. For more information on how the right tipping software can help you stay compliant and improve staff relations,  book a demo of TipHaus today.