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Tip Pools - Whose Tips Are They Anyway???

Published November 8, 2017 by Employment and Commerce Law Group
Tip Pools – Whose Tips Are They Anyway???

Tip pools are common in the service industries; tips are important to service employees obviously as the industry has a lower required minimum wage than other industries. The minimum wage for tipped employees is only $2.13 and has not been increased in over 25 years. It is crucial service employees keep all the tips to which they are entitled including those that are contributed to the dreaded “Tip Pool”.

So many workers in America rely on their tips to survive. Servers, delivery drivers, bartenders, hotel workers, etc. Unfortunately for these workers, the law often allows for employers to pay them at a rate much lower than the standard minimum wage. The Fair Labor Standards Act permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. Tipped employees are those who customarily and regularly receive more than $30 per month in tips.

One thing that needs to be clear to all tipped employees: “Tips are the property of the employee”.

That is not to say that sometimes Tip pools may be used by these establishments; more importantly, however, is the fundamental rule of tip pools: No employers are allowed in the pool. Tips belong to employees, not to the company. And, under the Fair Labor Standards Act (FLSA), the federal law that governs wages and hours, “employer” includes not just the owner or officers of a company, but anyone who acts in the employer’s interests regarding an employee. In other words, managers count as employers who can’t share in a tip pool. Another general rule of thumb is the rule tip pooling is OK for “front of the house” employees; but not those in the “back of the house”. According to the Department of Labor, tip pools must be restricted to employees who customarily and regularly receive tips.

However, whether this rule applies to a particular workplace depends on the manager’s job duties. Plenty of employers refer to low-level employees as “assistant managers” or “shift supervisors,” without giving the employees the authority that would ordinarily go along with such a title. These employees typically do much of the same work as line employees, with a few extra responsibilities (such as scheduling, deciding when employees may take their breaks, and so on). Despite their name, these employees probably can share in a tip pool, because they aren’t true managers as the law intends the term.

If your manager is taking part of your tips, or if you feel like the tip pool you are forced to take part in is illegal, feel free to contact our office and we will be glad to answer any questions you may have. We have successfully represented many individuals and groups of employees in helping them recover what is rightfully theirs under the law.

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