What is a tip pool?
Best Wage And Hour Lawyer Answer: A tip pool is known by a few different names, including tip sharing, tipping out, tip pooling, shared tipped jar or tip pot. Essentially, tip pooling is typically done in the service industry when the employer collects all or a portion of tips earned by employees and then redistributes the pooled tips evenly or by a set percentage to the tipped employees. Employer may require employees to par share tips through a tip pooling or tip splitting arrangement so long as each employee customarily receive more than $30 per month in tips. 29 C.F.R. § 531.54.
Can my job force me to participate in tip pooling?
Best Employment Lawyer Answer: Yes. As long as the tip pool is valid and complies with federal law, your employer can force you to participate in a tip pooling or tip sharing arrangement.
Can non-tipped employees participate in the tip pool?
Best Wage Theft Attorney Answer: No … unless the employer is not using a tip credit to pay tipped employees. Let’s break that down. A tip credit is when an employer is allowed to offset its minimum wage requirement to an extent based on the tips earned by the employee. (Best Law Read: How Does A Tip Credit Work?). If the company you work for uses the tip credit and a tip pool only tipped employees can participate in the pool. The Fair Labor Standards Act (“FLSA”) defines tipped as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 U.S.C.A. § 203(t).
However, if the employer does not take a tip credit, non-tipped employees can be included in the tip pool. A good example can be found in Cumbie v. Woody Woo, Inc., 596 F.3d 577, 582–83 (9th Cir. 2010). In this case, the employer did not use a tip credit, but rather paid the servers the full minimum wage. The employer further set up a tip pool that distributed a portion of the tips to the kitchen staff, who undisputedly do not fall within the FLSA definition of tipped employee. The United States Court of Appeals for the Ninth Circuit held:
The purpose of the FLSA is to protect workers from “substandard wages and oppressive working hours.” Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (citing 29 U.S.C. § 202(a)). Our conclusion that the FLSA does not prohibit Woo’s tip-pooling arrangement does not thwart this purpose. Cumbie received a wage that was far greater than the federally prescribed minimum, plus a substantial portion of her tips. Naturally, she would prefer to receive all of her tips, but the FLSA does not create such an entitlement where no tip credit is taken. Absent an ambiguity or an irreconcilable conflict with another statutory provision, “we will not alter the text in order to satisfy the policy preferences” of Cumbie and amici. Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 462, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002).
For the rest of the blog, we will only be considering the circumstances when an employer uses the tip credit, which is the overwhelming majority of cases in restaurants.
What happens if my job uses an invalid tip pool?
Best Wage Lawyer Answer: If you boss or manager violates the FLSA tip pool requirements, the employer will forfeit the tip credit and must pay the employee the full minimum wage resulting in the employee getting back pay for the amount to the tip credit taken for a period of two to three years based on the level of misconduct by the employer. Additionally, the FLSA requires that the employer also pay the wronged employee liquidated damages in an amount equal to the lost wages. (Best Law Read: What Damages Can I Get For Wage Violations And Retaliation Under FLSA?). Before liquated damages are awarded, however, the company you work for can affirmatively prove showing that it acted in good faith to avoid such an award.
Understanding the damages allowed further clarifies situations like in Cumbie, where the employer was not using the tip credit. Even if it was a violation of the FLSA to allow non-tipped employees to participate in tip pooling where no tip credit was taken, the damages would be to pay the employee the full minimum wage by repaying the tip credit taken. But, since no tip credit was taken, there is nothing to pay back, and thus, no lost wages. Liquated damages would be an amount equal to no back wages. Either way, either no violation or no damages, the same conclusion is reached.
Can the owner share in a tip pool and take part of my tips?
Best FLSA Lawyer Answer: Absolutely not. The owner is always considered the employer. The FLSA expressly prohibits employers from participating in employee tip pools. The FLSA defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). “Congress, in crafting the tip credit provision of section 3(m) of the FLSA did not create a middle ground allowing an employer both to take the tip credit and share employees’ tips.” Chung v. New Silver Palace Restaurant, Inc., 246 F.Supp.2d 220, 230 (S.D.N.Y.2002). See also Sorensen v. CHT Corp., Nos. 03 C 1609, 03 C 7362, 2004 WL 442638, at *6 (N.D.Ill. Mar. 10, 2004) (Best Law Read: Is Your Employer Sharing In Your Employee Tip-Pool? If So, They Owe You Wages; Can My Employer Keep Part Of My Tips? Get Help From The Best Wage And Hour Attorneys In Ohio!)
Can managers or supervisors ever keep tips or participate in a tip pool?
Top Ohio Wage Attorney Answer: No person that acts strictly and solely as a boss, manager, or supervisor has ever been able to participate in a tip pool. However, over the last 10 years a series of cases developed where courts held that managers that also participate customer and commonly tip related activities could participate in a tip pool, such as when a bar manager also spends significant time tending bar. These types of situations required a case-by-case analysis. However, a new Department of Labor (“DOL”) rule became effective November 23, 2021, which clarified that managers and supervisors are prohibited from keeping or sharing tips earned by tipped employees but can keep the tips given by customers directly to them based on the service that the manager or supervisor directly and solely provided. Because a tip pool involves sharing tips that are not directly and solely provided by the manager or supervisor, the rule implicitly prevents managers and supervisors from participating in a tip pool or other tip sharing arrangement. The new rule does expressly permit managers and supervisors to contribute to tip pooling and tip sharing arrangements. Thus, while a manager or supervisor may put money in, he or she can never take money out of a tip pool.
Who is a manager for the purposes of a tip pool arrangement?
Best Wage And Hour Law Firm Answer: DOL regulations defines a manager or supervisor as anyone: (1) whose primary duty is the management of the entire enterprise or of its customarily recognized subdivision or department; (2) who customarily and regularly directs the work of at least two employees; and (3) who has the right to hire or fire other employees, or whose input and recommendations regarding the hiring or firing of employees are given particular weight.
Can kitchen staff, cooks, and chefs participate in a tip pool?
Top Wage Theft Attorney Answer: No. Distributing tips to chefs, cooks and other kitchen or “back of the house” staff will invalidate a tip pool and cause the employer to lose the tip credit. (Best Law Read: Top Wage Lawyer Response: Can A Restaurant Force Wait Staff To Share Their Tips With Kitchen Staff?). Courts have relied on the FLSA’s legislative history and DOL interpretations of the FLSA to hold that such kitchen workers do not customarily and regularly receive tips. Specifically, a Senate Report on the 1974 amendments to the FLSA, expressly provides that “the employer will lose the benefit of [taking a tip credit] if tipped employees are required to share tips with employees who do not customarily and regularly receive tips—e.g., janitors, dishwashers, chefs, laundry room attendants, etc.” S.Rep. No. 93–690, at 43 (1974)S.Rep. No. 93–690, at 43 (1974). Likewise, the DOL Field Operations Handbook lists “chefs or cooks” as “occupations that would … not be eligible to participate” in a tip pooling arrangement. Dep’t of Labor Field Operations Handbook § 30d04(c) (1988). See also Myers v. Copper Cellar Corp., 192 F.3d 546, 550 (6th Cir.1999) (salad mixers did not engage in a customarily tipped occupation and should not be included in tip sharing).
Can a host or hostess participate in a tip pool?
Best Ohio Wage Lawyer Answer: Yes. Hosts, hostesses, maitre d’s and anyone else that is responsible for getting guests to tables at restaurants can participate in a tip pool under the FLSA. (Best Law Read: (See Top Wage and Hour Lawyer Reply: Can I Be Forced To Tip Out Hostesses?). In Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294 (6th Cir.1998),
the United States Court of Appeals for the Sixth Circuit held that “hosts … sufficiently interact with customers in an industry (restaurant) where undesignated tips are common,” and “perform important customer service functions: they greet customers, supply them with menus, seat them at tables, and occasionally ‘enhance the wait.’” Id. at 301. See also Dole v. Continental Cuisine, Inc., 751 F.Supp. 799, 800–01 (E.D.Ark.1990) (upholding a mandatory tip pool where servers tipped out to a maitre d’ whose responsibilities included setting up the dining room, greeting and seating customers, serving the first drink to customers, and assisting servers in serving customers as needed).
What should I do if my tips are being stolen?
Best Tipped Employee Rights Lawyer Answer: Front of the house staff at restaurants, including waiters, waitresses, servers, bartenders, valets, as well as other workers who depend on tips to earn a living are entitled to be fully compensated for the work that they perform. If your employer keeps part of your tips or otherwise violates the Federal Fair Labor Standards Act (FLSA) or Ohio Fair Labor Standards Act, contact the attorneys at Spitz, The Employee’s Law Firm today. (Best Law Read: How Do You Recover Stolen Wages?). Our Wage and Hour lawyers will provide you with a completely free and confidential initial consultation. (Read: What is the Spitz No Fee Guarantee?) The FLSA attorneys at Spitz will provide you with the best options for your overtime, minimum wage and other pay dispute situations. If you even think that you may be entitled to overtime pay that you are not being paid, it is best to call our top wage lawyers now.
Disclaimer:
The materials available at the top of this tipped wage violation, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Can my manager share my tips?”, “Do I have to tip out the cook?”, “What should I do if I am not getting all of my tips?” or “What do I do if I’m being forced to share my tips?”, then your best option is to contact an Ohio wage attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.