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Washington, D.C. Employers Faced with Many Training and Reporting Requirements to Keep Tip Credit

Compliance
Article
03/11/2019

With the passing of the Tipped Wage Workers Fairness Amendment Act (TWWFAA) in October 2018 that repealed Initiative 77 and the subsequent ruling by a Washington, D.C., Superior Court judge in December 2018, the effort by voters to eliminate the tip credit in the nation’s capital has all but been halted.

What will ensue are additional compliance regulations and a change in payroll reporting – both that might increase the workload on employers and HR personnel.

What is a tip credit?

A tip credit enables employers to pay tipped-wage employees less than the minimum wage because tip income generally results in a tipped worker’s wages reaching or exceeding the minimum wage. The tip credit is the difference between the minimum wage and the minimum cash wage. Using Washington, D.C., as an example, the local minimum wage, effective July 1, 2019, will be $14 per hour. The minimum cash wage will be $4.45. So, the tip credit will be $9.55.

Employers are responsible for making up the difference if an employee’s hourly tip earnings (averaged weekly) added to the minimum cash wage does not equal the full minimum wage in D.C.  

What does this mean for employers in D.C.?  

The TWWFAA probably will make employers – especially those in smaller establishments with fewer employees – sit down and crunch some numbers. Why? Because in order to maintain the tip credit, employers must comply with several provisions of the Act that could prove time consuming and costly.

The following requirements must be upheld to maintain the tip credit:

Sexual harassment training 

Employers have until July 1, 2019, to create a sexual harassment policy, file it with the D.C. Office of Human Rights (OHR), distribute it to all employees, and post it in a conspicuous place at work such as a breakroom. In addition, no later than July 1, 2019 and every subsequent July 1, employers must report the number of instances of sexual harassment to the OHR.

Sexual harassment prevention training must also be provided, and the OHR will create a model training course for employees, along with a list of certified providers to offer training, which will include prevention measures, response protocol, and intervention. Certification must be turned in to the OHR within 30 days of training completion.

All employees must participate in the training within 90 days of hire or have been trained within the previous two years. Training must occur every two years, and can be done online or in-person by non-managers, owners, and operators. Managers must attend in-person training sessions.

Minimum Wage Act training 

  • All owners, operators, and managers must complete training annually on the requirements of the Minimum Wage Act, with managers required to complete training in person while owners and operators can complete it online.
  • Certification of training must be provided to the OHR annually.

Wage statement requirements 

Employers must provide a statement with each wage payment that includes:

  • Payment date
  • Gross wages
  • Deductions and additions, with gratuities noted on separate line
  • Net wages
  • Hours worked
  • Employee’s tip declaration form for period, separating cash tips from credit card tips

Quarterly wage reporting requirements 

Employers must submit a quarterly report certifying each employee was paid at least the minimum wage (tip included). Effective Jan. 1, 2020, the third-party payroll processor must submit the quarterly report via a web application that has yet to be determined. Hotels are exempt from using a third-party payroll processor.

Reports must contain:

  • Employee name
  • Number of hours worked during the week by each employee
  • Total pay – tips included – for each employee
  • Average weekly salary for each employee
  • Employer’s tip-out policy – what numbers were used to calculate wages

Notice requirements

Employers also will be required to provide to employees a notice stating:

  • Provisions of subsection 4(f) of the Minimum Wage Act
  • Each employee may retain all their tips if there is no tip-sharing policy
  • Employer’s tip-sharing policy, if tips are shared
  • Percentage that tips are reduced for credit card fees

What’s next

Paychex will continue to monitor the developments regarding the training requirements, the website for submission of quarterly reports and reporting violations, and any updates related to the TWWFAA.

In your research for a third-party payroll provider, consider the more than 45 years of experience an industry leader such as Paychex provides to 650,000 business clients who utilize our payroll and HR solutions.

Carrie Wilson is an employment law compliance analyst at Paychex, Inc., a leading provider of integrated solutions for payroll, HR, retirement, and insurance services.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.