(a)

1. (1) Every employer of an employee engaged in an occupation in which gratuities have been customarily and usually constituted, and have been recognized as a part of remuneration for hiring purposes, shall be entitled to an allowance for gratuities as part of the hourly wage rate provided in Arkansas Code § 11-4-210 in an amount of no less than three dollars and sixty-two cents ($3.62) per hour, provided that:

   1. (A) The employee actually received that amount in gratuities; and
   2. (B) The application of the gratuity allowance results in payment of wages other than gratuities to tipped employees, including full-time students subject to the provisions of Arkansas Code § 11-4-210(b), of no less than two dollars and sixty-three cents ($2.63) per hour.
2. (2) For example, if the minimum wage rate is ten dollars ($10.00) per hour, then the tip credit may be up to seven dollars and thirty-seven cents ($7.37) per hour, and the minimum cash wage is two dollars and sixty-three cents ($2.63) per hour.

(b) Conditions for taking the tip credit.

1. (1)

   1. (A) The tip credit is only available for those occupations in which tips have been customarily and usually recognized as part of the remuneration for hiring purposes.
   2. (B) This includes waiters, waitresses, bellhops, beauty operators, and barbers, provided they actually receive and retain tips.
   3. (C) For any other occupation, it will be customarily and usually recognized as part of the remuneration for hiring purposes if the employee actually receives tips in excess of twenty dollars ($20.00) per month.

2. (2)

   1. (A) The tip credit may be taken only for hours worked by the employee in an occupation in which he or she qualifies as a tipped employee.
   2. (B) Under employment agreements or practices requiring tips to be turned over or credited to the employer to be treated by him or her as part of his or her gross receipts, the employer must pay the employee the full minimum hourly wage rate because the employee is not a tipped employee.
   3. (C) Dual jobs. Whenever an employee is required to work twenty (20) minutes or more in any occupation in which gratuities have not been recognized as part of the remuneration for hiring purposes, the rate for the entire hour shall be at least the applicable minimum wage rate without a tip credit.

(c) Payments which constitute tips.

1. (1)

   1. (A) A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed.
   2. (B) It is to be distinguished from payment of a charge, if any, made for the service.
   3. (C) A compulsory charge for service, such as ten percent (10%) 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 or her employees, cannot be counted as a tip.

2. (2)

   1. (A) In addition to cash, sums presented by customer which an employee keeps as his or her own, tips received by an employee include, within the meaning of the Minimum Wage Act of the State of Arkansas, Arkansas Code § 11-4-201 et seq.:

(i) Amounts paid by bank check or other negotiable instrument payable at par; and

1. (ii) Amounts transferred by the employer to the employee pursuant to direction from credit customers who designate amounts to be added to their bills as tips.

   1. (B) Special gifts in forms other than money or its equivalent as above described, such as tickets, passes, or merchandise, are not counted as tips.

2. (3) Tip pooling.

   1. (A) Where employees practice tip splitting, as where waiters give a portion of their tips to the bussers, both the amounts retained by the waiters and those given the bussers are considered tips of the individual employees who retain them.

   2. (B) Similarly, where an accounting is made to an employer for his or her information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his or her own are counted as his or her tips.

      1. (d) The tip credit is in addition to any credit for board, lodging, apparel, or other items or services pursuant to:
3. (1) Arkansas Code § 11-4-213; and
4. (2) 11 CAR § 11-704.

(e) Overtime payments.

1. (1) When overtime is worked by a tipped employee, his or her regular rate of pay is determined by dividing his or her total remuneration for employment in any workweek by the total number of hours actually worked by him or her in that workweek.

2. (2) A tipped employee’s regular rate of pay includes:

   1. (A) The amount of tip credit taken by the employer;

   2. (B) Any allowance taken by the employer for board, lodging, apparel, or other items and services as authorized by:

      1. (i) Arkansas Code § 11-4-213; and
      2. (ii) 11 CAR § 11-704; and
   3. (C) The cash wages paid including commissions and certain bonuses or other payments paid by the employer.
3. (3) Any tips received by the employee in excess of the tip credit need not be included in the regular rate of pay for determining overtime payments.

(f) Failure to maintain tip records.

1. (1) It is the employer’s obligation to maintain tip records as required by 11 CAR § 11-202(c) if the employer utilizes a tip credit or allowance.
2. (2) If the employer fails to maintain such records, the employer is not entitled to a tip credit or allowance against the minimum wage unless the employer can prove that the employee against whom a tip credit or allowance is sought actually received and retained each workweek tips in an amount equal to or greater than the tip credit or allowance claimed.