The cost of cash deliveries used to pay out credit card tips are incidental and discretionary expenses that cannot be deducted from an employee’s tips for an employer to take advantage of the tip credit under the Fair Labor Standards Act.

“Unlike credit card issuer fees, which every employer accepting credit card tips must pay, the cost of cash delivery three times a week is an indirect and discretionary cost associated with accepting credit card tips. As the district court noted, this cash delivery was “a business decision, not a fee directly attributable to its cost of dealing in credit.” Moreover, Perry’s deducted an amount that exceeded these total costs—credit card issuer fees and cash-delivery expenses—in nine of the relevant restaurant-years . . . . Allowing Perry’s to offset employees’ tips to cover discretionary costs of cash delivery would conflict with § 203(m)’s requirement that “all tips received by such employee have been retained by the employee” for employers to maintain a statutory tip credit.” 2016 WL 3268996, at *4.

Steele v. Leasing Enters., Ltd., No. 15-20139, 2016 WL 3268996 (5th Cir. June 14, 2016) (Higginson, J.).