I work for a payroll processer and we have a new client that operates car washes in the state of Iowa (not the automatic ones, but the ones they wash the inside of the car also.) At the end of the car wash line, there is a tip jar. Previously, this company has been pooling the tips and paying them out at the end of each 6 month period based upon a percentage of hours worked during that time period (but they are only paying these tips to the employees that are currently working there).

We feel that 6 months is too long to hold on to the tips. The only reference I can find is in the US Department of Labor website that states..."The law forbids any arrangement between the employer and the tipped employee whereby any part of the tip becomes the property of the employer."

Doesn't keeping the tips for 6 months make it property of the employer? Does anyone know of any Iowa law that states how often pooled tips need to be paid?

Thank you for all your assistance.

Angie

I think federal law says "promptly". But in any case, I believe the federal DOL would say that 6 months is too long, as well. Plus, what happens if the employee terminates during the wait?

However, and I've been in payroll for many years, so please don't take this wrong, but are you merely processing the payroll or are you being paid to provide legal advice? Your contract as a payroll processing business should address this situation. Generally speaking, such businesses are not charged with, nor are being paid to, provide legal guidance to a client company; it's just more than the company, in my opinion, should be taking on. Besides, what happens if your company gives incorrect advice, even if inadvertently? Whose legal liability is it? I'd be very careful with this.