Industry Research

Labor Department Fails To Understand Limo Industry Tips

Posted on November 1, 2012 by Sara Eastwood-McLean - Also by this author

PUBLISHER'S PAGE/NOV. 2012: The Department of Labor came into our focus in 2009 after President Obama began to ramp up on new policies. In 2010, the National Limousine Association began to hold agency meetings with the IRS and the DOL, only to be stunned by the attitudes they were met with. It was made clear to the NLA board in particular that the DOL was going to get heavy handed with us on wage and overtime — with an emphasis on non-cash tips.

They have taken a hard line on viewing any service fee or gratuity which is NOT paid by the passenger after the service is performed as an imposed gratuity. This makes it subject to wage and overtime laws. Federal officials have insisted on this approach without looking at the realities of how our industry is structured.

The truth is that about 85% of all trips performed are paid for by a third party, not the passenger. What’s more, most of the time the person or company booking the trip frowns on the tip being paid by the passenger because those passengers are either the booking agents’ clients (i.e. law firms providing chauffeured service for clients or entertainment companies contracting transportation for their rock stars) or employees (i.e. business travelers expected to carry hundreds of dollars in company cash).

Given this, it is totally inappropriate and illogical for the DOL to take the position they have. To me, they are thinking in terms of doormen or bellhops whose cash tips average $10 per client. In the restaurant industry, the patron signing the check at the end of the meal is the same person who ordered it, so adding the tip personally makes sense. In our world, a very small percentage of the service is ordered by the passenger, so compelling them to tip does not make sense.
The NLA presented a strong argument to the DOL that placing the tip onto the invoice is for the convenience of the client, which in most cases is not the passenger but the booking agent of the contracted corporation.

No one knows whether or not the DOL was paying attention to our realities. But one thing is for sure: If the agency decides to force us to include the presumed tip as part of wage and hour, the chauffeur will get the short end of the stick.

Sara Eastwood-McLean

[email protected]

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