DOCUMENTARY STAMP TAXES

By: Michael E. Workman, Esq.

If you have bought or sold real property in Florida, or if you have borrowed money in Florida, then you have probably seen references to the collection and payment of documentary stamps taxes. You may have heard them referred to as doc stamps or the stamp tax. Documentary stamps taxes have nothing to do with the preparation of the documents for a real estate closing or a loan, although you may have to pay a separate fee for such services. Instead, they are an excise tax on documents that is payable to the Florida Department of Revenue on documents executed and/or delivered in the State of Florida.

Section 201.01, Florida Statutes (2018), lists the documents that are generally subject to the documentary stamp tax. Common examples of documents subject to the stamp tax are deeds, promissory notes and mortgages. Deeds and other documents that transfer an interest in real property are taxed at a rate of 70 cents per $100, or any fraction thereof, of taxable consideration. Additionally, Miami-Dade County imposes an additional surtax on some transfers of real property. For purposes of calculating documentary stamp taxes on deeds, taxable consideration can include money paid or agreed to be paid, the discharge of an obligation, and the amount of any mortgage or other encumbrance on the real property. Promissory notes and mortgages are taxed at a rate of 35 cents per $100, or any fraction thereof, of the amount of the indebtedness indicated in the document; however, unsecured promissory notes are subject to a maximum documentary stamp tax of $2,450.

Prior to March 31, 1997, the Department of Revenue issued adhesive stamps that were affixed to documents in the appropriate amounts denoting that the documentary stamp taxes had been paid. When these adhesive stamps were used, they were initialed and dated so that they could not be used again. Now, the amount of the documentary stamp taxes is typically calculated and collected by the closing agent and remitted to the Clerk of Court with the deed or mortgage for recording. For unrecorded documents, documentary stamp taxes are remitted to the Department of Revenue using a form prescribed by the department. One of our experienced attorneys can help you with your doc stamp questions, as well as closing your transactions that trigger the payment of doc stamps.

Michael E. Workman is a shareholder with the law firm of Clark, Campbell, Lancaster & Munson, P.A., in Lakeland. Questions can be submitted to thelaw@cclmlaw.com

landlord category

Tenant Considerations in Leasing Commercial Property

By: Kyle H. Jensen

Tenants determining whether commercial property is suitable for their business often consider the location and appearance of the property, the cost to rent the property, and other similar business factors. Unfortunately, many tenants, especially those new to leasing property, fail to consider numerous other issues that, while perhaps not directly related to the operation of their business, have a significant impact on their business.

One of the most important steps a tenant must take when considering whether to lease property is to read the entire lease provided by the landlord before signing. A tenant may trust the prospective landlord; however, what is agreed to verbally may not be enforceable unless it is put in writing and included in the lease. Therefore, it is important to review the lease to confirm the agreed upon terms, such as amount of rent, length of term, and size and location of the leased premises, are included in the lease.

It is also important to confirm there are no terms within the lease that are harmful to the tenant or its business. For example, landlords often include a provision in their lease that allows them to relocate the tenant. This may be acceptable to some tenants, but other tenants have chosen a property because it is uniquely suited to their purposes and relocation could significantly harm or even destroy their business. If there are any terms within the lease that are harmful to a tenant, the tenant must determine whether such terms can be removed or if the tenant must walk from the property.

The allocation of maintenance obligations between the tenant and landlord is another important term for tenants to consider. Landlords often place most if not all of the maintenance obligations on the tenant. This can be appropriate, especially in stand-alone buildings with one tenant; however, when there is shared space and multiple suites, such as in a shopping center, it is important that the landlord, at the very least, be obligated to maintain the foundations, exterior walls, roof, and any common spaces (such as parking lots), for the benefit of all the tenants on the property. Tenants should also consider whether the they want the landlord responsible for maintenance of expensive systems serving the property, such as the heating, ventilation and air- conditioning system.

Some questions a tenant should when reviewing a lease are: (i) who is responsible for payment of utilities to the property, (ii) what is the grace period for failing to pay rent on time and are there late fees, (iii) what are the landlord’s remedies if the tenant defaults, (iv) does the tenant’s obligation to pay rent abate if the premises is not tenantable, (v) does the lease authorize tenant’s intended use of the property, and (vi) does the lease provide for sufficient parking for the tenant’s use? In addition to the foregoing questions, tenants should consider whether they want to include any tenant favorable provisions such as: (i) an option to extend the term of the lease, (ii) an early termination right, or (iii) an option to lease additional space in the property when such space is available.

While it is important that tenants review their lease, it is also important that tenants carefully and thoroughly inspect the prospective property, especially if the tenant has broad maintenance obligations. Generally, a lease provides the tenant is taking the property in its “as-is” condition. Accordingly, it is important that tenants inspect the property to confirm it is in good condition and suitable for tenants needs. If there are any issues with the property, the tenant should require the landlord remedy such issues before the tenant takes possession of the property. Properly investigating the property before entering into the lease will protect the tenant from costly and unforeseen repairs or maintenance bills after taking possession of the property.

Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

landlord category

Landlord Remedies upon a Breach of a Residential Lease by Tenant

By: Zachary H. Brown

Landlords can be put into precarious situations upon a breach by a tenant. Normally the contract, or lease agreement, signed by the landlord and tenant will spell out what constitutes a breach, and what remedies may be available to the landlord in the event a lease is terminated. This article will serve as a basic overview of what remedies are available to landlords when structuring residential leases.

A landlord must be cautious to only exercise the remedies that are available to it upon termination of the lease. A lease is terminated when the tenant has breached, abandoned, or renounced the lease before the expiration of the term of the agreement. It is important to know how and when a lease is terminated, what the proper notice requirements are, and if the tenant has effectuated a cure. Lease terminations are strictly governed by the contract and Florida Statutes.

Once the lease has been terminated, the landlord usually has a variety of options it can pursue when deciding on a proper remedy. It is important to note that if the lease agreement dictates what path the landlord must take, then the landlord will be bound to that contractual provision. Common landlord remedies are: (a) treat the lease as terminated and retake possession of the dwelling unit, thereby terminating any further liability of the tenant; (b) retake possession of the dwelling unit for the account of the tenant, holding the tenant liable for the difference between the rent stipulated to be paid under the lease agreement and what the landlord is able to recover from reletting the premises; (c) do nothing and hold the tenant liable as the rent comes due; or, (d) charge liquidated damages or an early termination fee to the tenant, as provided by a provision in the lease agreement.

If the landlord chooses to retake possession of the dwelling unit for the account of the tenant (option (b) above), the landlord has a duty to exercise good faith when he or she attempts to relet the premises. Any rent the landlord receives after reletting the premises will be deducted from the balance of rent due from the tenant.

Landlords also must be careful not to take any action that may be considered a waiver of one of the available remedies. Florida courts have held that a landlord’s failure to exercise a remedy option available to it under a lease will constitute a waiver. For example, this is most commonly seen when a landlord accepts rent payments from a tenant after a lease has already been terminated.

Lastly, by statute in any civil action to enforce the provisions of a lease, Florida law dictates that the party in whose favor a judgment or decree has been rendered may recover reasonable attorney’s fees and court costs from the non-prevailing party. So, if a landlord is forced to take a tenant to court over the issue of a proper remedy, the landlord will recover attorney’s fees if it is successful in its lawsuit.

Electing a proper remedy for landlords can be a complicated issue. If you’re a landlord and have experienced what you think may be a tenant breach, or outright termination of a lease, it is probably best to consult with a local attorney about the best option you can pursue moving forward.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Eminent Domain and Just Compensation

By: Zachary H. Brown

How does government acquire the land it uses to install utilities or construct new roads? It exercises an authority that is called eminent domain. Eminent domain allows the government to take private property if it is for a “public use.” The phrase “public use” is contentious since, depending on who is defining it, could greatly limit or increase the government’s authority to take private property. This article gives some background on what eminent domain is, and how property owners can either fight it or at least be fully compensated for it.

The Fifth Amendment to the United States Constitution, in part, reads that no person shall be “deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” Courts have usually deferred to what the legislature defines as “public use” rather than deciding for themselves. A generic definition of a public use is that the property does not have to be used by the public, but rather the property must be taken for a public purpose. Courts have ruled that this public purpose can be served through a governmental department, or even a private enterprise, and still satisfy the “public use” requirement.

Governments use eminent domain for a number of different reasons. Some are obvious, but others are somewhat surprising. Eminent domain is most commonly used when governments have to do things such as acquire land for roads, or build power lines, where the government is providing an important function to the local community. However, government will, in some cases, acquire downtrodden or “blighted” areas of the community and attempt to redevelop them in order to increase the economic and cultural output of those areas. Governments can do this because positive economic development is a good for the public, therefore the taking of private property is done for a public purpose.

As mentioned, government can only take property using eminent domain when it gives the property owner just compensation. What exactly is just compensation? Most people would say the fair market value of whatever land the government is trying to take. However, the question can be more difficult than that. What if the property has structures on it, connects one piece of the property owner’s land to another, or the taking negatively impacts the use of the remainder of their property? Florida law dictates that the answer to those questions is something that is decided by  a jury selected from citizens in the local community.

If a property owner feels that the compensation offered was not just, challenging the government can get expensive. That’s why the Florida Legislature has enacted a law that states the property owner has a right to reasonable attorney’s fees and appropriate expert costs for eminent domain proceedings in the Circuit Court. There are limits on this right, and courts have held that this right only extends to fees that are “incurred in the defense” of eminent domain proceedings. It is important to consult with an attorney before deciding if an eminent domain case is worth fighting in court.

Eminent domain is a powerful, but very necessary, tool the government uses to provide important functions for its constituents. However, it can be an infringement on private property owner’s rights unlike anything else the government does. If you become aware of or receive notice of an eminent domain action that may impact your property, it is important to consult with a local attorney about the rights and remedies that you may have.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Retroactive Medicaid in Florida Has Been Eliminated: Is This Good or Bad?

By: Kevin R. Albaum, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Medicaid is a joint federal and state health insurance program that will help many people with limited income and resources pay for their health care. For those with disabilities or illness and no funds available to pay for care, Medicaid health insurance is often the only option available to pay for their medical services.

Since 1972, Retroactive Medicaid Coverage (“RME”) has been available for individuals to receive Medicaid coverage up to three (3) months before they have even submitted an application for Medicaid benefits. The goal of RME was to protect people that were eligible for Medicaid benefits but did not know to apply for assistance until after they had received medical services or because a sudden injury or illness prevented them from applying timely for assistance. RME meant that individuals (that truly had minimal assets or income) who ended up in a health crisis would be able to receive benefits to pay providers for care they had received. However, Florida RME is no more.

The State of Florida requested and received authority from the Centers for Medicare and Medicaid Services to eliminate RME. Effective February 1, 2019 Florida has eliminated RME for most Medicaid programs in the state. RME will only remain in effect for pregnant women or children under age 21. However, everyone else that may need coverage (such as an elderly woman in a nursing home or a 30-year-old in a catastrophic car accident) will not have this option to pay for their medical services. To receive Medicaid benefits, a person must now file for benefits in the month they received medical services.

The goal of cutting RME is to save the state and federal governments substantial funds in their annual budget appropriations. It is estimated that cutting RME in Florida will save the state and federal government footing the bill for Medicaid approximately $98 million per year. However, the government’s savings will result in medical providers almost certainly not receiving any private pay or insurance payment for many services they are providing to these people (as people who need Medicaid have very limited income or resources). In turn, this may lead to higher future costs for medical services to those of us that are able to pay for our medical services.

As an elder law attorney, I often come across seniors (sometimes incapacitated seniors) with minimal or no assets that are not even aware that they need Medicaid to pay for their nursing home care. They might not find out until after their primary insurance benefits (Medicare and/or Tricare) have been fully exhausted and when insurance companies refuse to pay for any further skilled nursing care. RME is vital for these seniors to avoid discharge from the nursing home for non-payment. Only time will tell if the elimination of RME was a good thing that saved our state and federal governments (and us as taxpayers) substantial money or a bad thing that financially harmed our medical service providers (with large accounts receivable from people that cannot afford to pay their medical bills) and those people who already had no means to pay for their own medical services.

It is more imperative now than ever to have a basic understanding of Medicaid programs for senior care so that family can act quickly to gain eligibility for these benefits if they are ever needed in the future. Elder law attorneys typically specialize in this area of the law and can assist in proactive planning to pay for senior care in the future.

Kevin Albaum is a shareholder in the Elder Law Practice at Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@cclmlaw.com.

landlord category

PROTECTING LANDLORDS FROM LIENS FOR TENANT IMPROVEMENTS

By Michael E. Workman, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Often a tenant will want to make improvements to the premises that it is leasing from a landlord, and sometimes the lease agreement will require the tenant to make improvements. When the tenant contracts for the construction of such improvements, construction liens can attach to the tenant’s leasehold interest in the leased premises pursuant to Florida’s Construction Lien Law. However, the Construction Lien Law also provides a way for the landlord to protect its fee simple interest in the leased premises from the tenant’s construction liens.

A lot in a mobile home park leased to the owner of a mobile home will not be subject to tenant liens. In other instances, the landlord’s interest in the leased premises will not be subject to construction liens for the tenant’s improvements if: a) the lease agreement expressly states that the landlord’s interest shall not be subject to liens for tenant improvements; and b) the lease agreement or a memorandum of the lease that contains the express language prohibiting liens for tenant improvements is recorded in the public records where the leased premises are located prior to the recording of the Notice of Commencement for the tenant improvements.

If the lease agreement expressly states that the landlord’s interest shall not be subject to liens for tenant improvements, then the tenant is required to notify its contractor of the provisions in the lease agreement. The knowing or willful failure of the tenant to provide such notice to the contractor makes the contract between the tenant and contractor voidable at the contractor’s option. A tenant’s contractor may make written demand upon the landlord for a copy of the lease provisions prohibiting liens for tenant improvements, and the copy provided by the landlord must be verified in writing as being true under penalties of perjury.

It is critical that a landlord strictly comply with the provisions of the Construction Lien Law to protect the landlord’s interest in the leased premises from tenant liens. Negotiating lease terms can be a complicated process, and an experienced real estate attorney can help guide you along the way.

Michael E. Workman is a shareholder with the law firm of Clark, Campbell, Lancaster & Munson, P.A., in Lakeland. Questions can be submitted to thelaw@cclmlaw.com

landlord category

Landlord Considerations in Leasing Commercial Property

By: Kyle Jensen, Esq.
Clark, Campbell, Lancaster & Munson, P.A

A commercial lease agreement is an agreement between an owner of commercial real property, known as the landlord, and a third-party desiring to rent such commercial property, known as the tenant. The lease agreement provides the tenant with the right to use the property, sets forth the terms and conditions of such use, and imposes certain rights and obligations on both the landlord and the tenant. Accordingly, it is in the best interest of the landlord to ensure the lease agreement accurately and unambiguously sets forth the terms, conditions, rights and obligations the landlord desires to impose and properly protects the rights and interests of the landlord.

When preparing a lease agreement, a landlord should confirm its lease agreement complies with all legal requirements established by Florida law to ensure the lease agreement is enforceable. For example, any lease agreement in excess of one year must be in writing and must be signed before 2 subscribing witnesses.

A lease agreement should clearly define the beginning and end of the lease term and provide the landlord with sufficient remedies if the tenant refuses to vacate the leased premises once the lease term is over. The lease agreement should also set forth the base rent obligations a tenant must pay to occupy the premises and include any additional rent obligations the landlord desires to impose upon the tenant, such as payment for (i) the utilities the tenant consumes, (ii) a portion or all of the property taxes assessed against the landlord’s property, (iii) a portion of the costs to maintain the common areas (areas used by all tenants) of the landlord’s property, and (iv) janitorial and waste collection services for the premises. It is also important that the rent provisions of the lease agreement impose upon the Tenant the obligation to pay all sales tax that may be due on the rent paid under the lease agreement.

Maintenance obligations are another important item a landlord must consider. Generally, but not always, a landlord will maintain the exterior, foundation, and roof of the building the tenant is occupying. The landlord will want to impose most, if not all, other maintenance obligations on the tenant. A landlord may also want to require the tenant enter into a maintenance agreement for maintenance of certain items in the premises, such as the HVAC unit, to ensure the tenant is properly fulfilling its maintenance obligations.

Lastly, a landlord should ensure the lease agreement clearly and broadly defines what actions, or failure to act, will cause a breach of the lease agreement, such as failure to pay rent, and provides the landlord with sufficient remedies upon such breach. For example, unless otherwise provided in the lease agreement, a landlord is only entitled to collect rent as such rent becomes due. Accordingly, a landlord will want the lease agreement to provide that if the tenant breaches the lease agreement, then the landlord can accelerate and collect all future rent due under the lease agreement. Such a provision allows the landlord to, upon the tenant’s breach, immediately collect all future rent due under the lease agreement, subject to present value calculations and reimbursement obligations if the premises is re-let, without waiting each month for such rent to become due.

The above items are only a few of the numerous matters a landlord should consider when preparing a lease agreement. Furthermore, the content of the lease agreement will depend on, among other things, the use, condition, and location of the commercial property and the long-term goals of the landlord. Therefore, a landlord should seek the services of an experienced commercial real estate attorney to assist with the preparation of the lease agreement.

Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Distinguishing Variances and Special Exceptions

By: Zachary H. Brown
Clark, Campbell, Lancaster & Munson, P.A.

There are many avenues that property owners could travel to get around certain restrictions that local governments impose upon property throughout their jurisdiction.  Sometimes local governments will restrict, for example, how high buildings can be built, or how property can be used.  Such restrictions play an important role in how local governments plan and zone our communities.  The most common tools that allow property owners to get around these restrictions are variances and special exceptions.

The primary difference between a variance and a special exception is that a variance grants a property owner the ability to use his or her property in a manner that is completely against local regulations, while a special exception is a circumstance that local governments specifically recognize before drafting a law, and will make provisions that recognize exceptions in the regulation itself.  Each tool comes with its own benefits and drawbacks, but after a brief explanation they may be slightly easier to understand for property owners seeking to develop their property.

A variance is granted only when a property owner shows an undue hardship created by unique circumstances that the property owner did not create.  The law is very clear that if the hardship is created by the property owner, a variance should not be granted.   For example, is a hardship self-created if you buy a piece of property expecting to put a gas station on it, but local zoning laws prohibit gas stations in that zone?  Florida courts have held in that situation, the hardship was self-created because that person knew of the zoning laws before buying the property, and thus created the hardship for himself.  In essence, ignorance of local laws does not create undue hardships for property owners.

Typically, variances can fall into two categories – use variances and area variances.  Use variances allow for property owners to use their property in a way not allowed by law, such as using your property in a zoning district that prohibits certain uses.  An area variance allows property to be developed in a way that violates some dimensional requirement imposed by local regulations.  This is most commonly found in height restrictions or setback requirements in local land development codes, where those restrictions limit development in such a way that development of the property is considered impossible.

Special exceptions are used by local governments when a particular use of the land is potentially problematic, but can be allowed if subjected to heightened development standards.  These are also frequently referred to as special use permits or conditional use permits.  Common examples of special exceptions are adding religious buildings or schools to local neighborhoods where residential property is the primary use.  Local governments will grant these requests, but likely only by requiring certain “conditions” be met prior to approval of the use.  There are a number of different conditions local governments can impose, but a few of them include landscaping features, parking upgrades, or right-of-way conveyances.

These are just a few common tools that are available for those property owners seeking to develop their property.  As always, the best course of action is to retain a local attorney to assist with this process.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

The Basics of Medicaid Financial Eligibility for Nursing Home Residents

By: Kevin R. Albaum
Clark, Campbell, Lancaster & Munson, P.A.

A person’s transition to a skilled nursing facility (a/k/a “Nursing Home”) is often a very difficult time for a family. Not only is the person’s physical or mental health often declining but the person and/or their family is often burdened with figuring out how to pay for the facility. Health insurance coverage often will pay for the first few days or months at the Nursing Home but that eventually stops and the cost of a Nursing Home once health insurance is no longer paying often gets exorbitant even for the middle-upper class (the monthly cost for a private pay resident at many Nursing Homes can often exceed $10,000.00 per month). This results in residents no longer being able to afford the Nursing Home and having only two (2) options to pay for their care: (1) qualify for Medicaid Nursing Home coverage or (2) pay the private pay rate any way possible by selling off all assets, impoverishing the spouse at home (the “Community Spouse”) or getting financial help from their children. Many decide to pursue the first option.

In order to qualify for Medicaid Nursing Home coverage in Florida, an applicant must pass a three (3) part test that looks at a person’s assets, income, and health at the time they file the Medicaid application. The scope of this article is just to discuss the basics of the asset and income eligibility tests for Medicaid Nursing Home coverage in Florida in 2019.

Income: Effective January 1, 2019, an individual can have a maximum of $2,313.00 per month in income (before deductions) in order to be eligible for Medicaid Nursing Home coverage. However, if an individual’s income is above that figure, then proper legal planning to create a qualified income trust will be often utilized in order able to make the individual eligible. However, timing is very important because if the income trust is not set up properly and funded properly, an individual will still not be eligible for Medicaid. There is a common misconception that a Community Spouse’s income being too high will limit the applicant spouse from obtaining Medicaid eligibility, however, a Community Spouse’s income can be unlimited and it does not impact a Medicaid applicant’s eligibility for Medicaid benefits.

Assets: Effective January 1, 2019, an individual can have a maximum $2,000.00 of countable assets and be eligible for Medicaid Nursing Home coverage. However, if an individual’s countable assets are above that threshold there are often a multitude of legal planning options available in order for the individual to become eligible for Medicaid Nursing Home coverage. There are two (2) types of asset classes to consider when applying for Medicaid Nursing Home coverage: Countable Assets (assets that impact Medicaid asset eligibility) and “Non-Countable Assets” (assets that are not calculated into Medicaid asset eligibility). Some Non-Countable Assets are as follows: homestead property up to $585,000.00 in value; one automobile of unlimited value; a prepaid burial contract with a nursing home (in most circumstances) and term life insurance without a cash value. Most other items such as bank accounts, investment accounts, life insurance with a cash value, CDs, annuities, etc. are considered Countable Assets. There is also a common misconception that a Community Spouse must also not have any assets in order for their spouse in the Nursing Home to be eligible for Medicaid benefits. Effective January 1, 2019, a Community Spouse can have a maximum of $126,420.00 of countable assets without impacting their spouse’s Medicaid eligibility.

Obtaining Medicaid eligibility and understanding the income and asset tests can be incredibly complex to those who are new to the subject, therefore, it is highly recommended that a qualified elder law attorney assists you in obtaining Medicaid financial eligibility before you file a Medicaid application.

Kevin Albaum is an attorney in the Elder Law Practice of the law firm Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@cclmlaw.com.

Tips on Tips: How Business Owners Can Handle Employee Tips

By: Zachary H. Brown, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Tipping is a clear process that most of us consider second nature at this point. However, the law behind the tip, and how employees and employers utilize the tip, is less clear. Does that tip always go to the employee? Can an employer pay an employee less than the legally required minimum wage based on an employee’s tips? The following are certain legal points that will help business owners navigate the world of tip law.

The basics of tip law are rooted in labor law. Business owners must pay employees a minimum wage based on federal and state law. This wage, at the federal level, is $7.25 an hour, but Florida law requires that employees are paid at least $8.25 an hour. If an employee is a “tipped employee,” then under the Fair Labor Standards Act (FLSA) employers can use a portion of the employee’s tips as a “tip credit,” which means they may reduce the minimum wage owed to an employee up to a certain extent based on the employee’s tips. In Florida, the law allows employers to reduce the minimum wage with a tip credit of up to $3.02 an hour.

However, an issue still arises as to when an employee is technically considered a “tipped employee” or whether he or she is a normal employee for the purposes of minimum wage. For example, an employee who works at a restaurant both as a server and as a host/hostess, but the employee is only tipped for the server job. This makes it imperative for a business owner to keep track of when an employee is receiving tips, so that the tip credit is only applied to the wages the employee earns while that employee is being tipped.

Business owners should also be wary of reducing employee tips based on credit card charges. The idea behind this is that if an employer is charged a 3% service charge on credit card transactions, that employee who is claiming those credit card tips should bear that cost. Thus, it is a common trend that employers will reduce an employee’s tips by 3% as a result of this credit card transaction fee. While the FLSA allows for this deduction at the federal level, Florida law on this matter is still undecided, so reducing employee tips by this amount comes with its fair share of risk.

Mandatory service charges are another aspect requiring close attention by business owners. For example, in restaurants when the party is six people or more, or when room service is ordered at a hotel, customers are used to receiving an 18% mandatory service charge that is already included on the bill. While most of us consider this an automatic tip that will go to the server or employee attending to the customer, it actually is part of the taxable sales price of the food or drinks, and thus the business owner does not have to share this charge with the employee. Only when the mandatory service charge is separately and clearly stated as a gratuity or tip will the employer be legally obligated to give the benefit to the employee.

As always, it is important to consult with a local attorney before making changes on how to handle tips in the workplace.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.