Sec. 146-2.20. Tips charged on credit cards

When tips are charged on credit cards, an employer is not required to pay the employee's pro-rated share of the service charge taken by the credit card company for the processing of the tip. The employer must return to the employee the full amount of the tip charged on the credit card, minus the pro-rated portion of the tip taken by the credit card company.

Example

The bill totals $100 exactly. The customer leaves, on their credit card, the $100 payment of the bill, as well as a $20 tip. Both the tip and the bill must be processed through a credit card company which charges a 5 percent fee on all transactions. The total charge levied by the credit card company on the $120 charge is $6. Of that $6, $5 is for the bill (5 percent of $100) and $1 is for the tip (5 percent of $20). The employer must provide the employee $19, which represents the $20 tip minus $1 pro-rated employee's portion of the surcharge).