Who May Dip in the Tip Pool?

Every week, I get questions about the legality of tip pools. It can be a very confusing practice and I never wanted to give anyone misinformation. That’s why this blog post is written by a real life labor and employment lawyer who can answer all of our questions.  xo, BW


Whether you’re just getting your feet wet in the restaurant service industry or are fully immersed as a lead server, you know that it is from tips that the more quenchable waters flow. Particularly, if you’re a waiter whose employer utilizes the tip credit, tips are a server’s livelihood; for, after taxes and deductions, any remaining earnings at $2.13 an hour will be a parched paycheck, if that. 

Many restaurants implement a tip pool which requires servers to share their tips among certain co-workers. In the best light, this communal contribution engenders teamwork, productivity, and ultimately better service — which should foster better tips. Those hosts, bartenders, bussers and food runners upon whom servers rely to keep their tables quickly served, quickly cleaned, and even more quickly seated again all deserve a share in the generous reward from the customer. And if all participants play their parts well, a server typically has no qualms with paying these pipers.  Afterall, it is the total dining out experience, including the overall friendliness and efficiency of everybody’s service and contribution, as well as the comfort and cleanliness of the general environment, that prompts a customer’s willingness to tip generously, or not.

More than engendering teamwork and camaraderie in the restaurant workplace, sharing tips among employees is a legally defined practice, in large part governed by Federal Law known as the Fair Labor Standards Act (“FLSA”). The federal law is the minimum requirement – a state is free to enact laws that are more restrictive (i.e. more favorable to employees). The following are a few tips for servers to be on the lookout for and to avoid being a victim of illegal tip theft:

Employees paid a base wage of less than the FLSA’s mandated minimum wage

For servers who are paid less than minimum wage because their employers utilize the “tip credit” and rely upon a server’s tips to make up the difference between their base hourly wage and the FLSA’s tip pooling regulations are very rigid – requiring an employer to strictly adhere to the requirements or risk losing the tip credit.

It should be obvious, but owners and supervisory management are prohibited from participating in any tip pool. Even if an owner or manager intermittently perform the duties of a host or waiter or bartender, they may not partake in sharing in any tip pool. Additionally, back-of-house employees are not permitted to participate in the tip pool either, in keeping with the FLSA guidelines which state that only those employees who customarily and regularly receive tips are valid participants in a tip pool. Back-of-house employees include janitorial employees, dishwashers, cooks and all kitchen staff, as well as bussers and food runners in establishments where these positions are considered “back-of-house.”  Furthermore, back-of-house employees legally ought to be paid at least the mandated minimum wage, so not only would it be illegal to require an employee earning a base pay of less than minimum wage to share their tips with back-of-the-house, but it is patently unfair.

Employees who may legally participate in a tip pool include other waitstaff, bartenders, and hosts – along with bussers and food runners in establishments that deem these positions as “front-of-house.”

Employees paid at least a base wage of minimum wage

In March of 2018, Congress amended the FLSA to address the concerns of the public and several worker advocate groups. The text of the FLSA, which is now federal law, now provides that employers may not keep a tipped employees tips for themselves, even if the employer pays the employee more than minimum wage. The amendment goes further to state that not only may an employer not keep the tips for themselves, the employer cannot allow managers or supervisors to keep an employee’s tips. These amended provisions specifically state that the FLSA’s tip protection laws apply regardless of whether an employer pays more or less than minimum wage.

Other possible deductions taken from tips

The only other deduction that may be taken out of a server’s tips, whether the server is paid less than minimum wage or at least minimum wage before accounting for tips, is the credit card processing fee. An employer may deduct the actual percentage of the credit card processing fee – typically 1% to 3% of the total sale of the charge – and no more. An employer may not deduct an amount exceeding the actual cost for such fees. This is an area where employers may hide their skimming, by deducting more than the actual fee.

Here is another article that discusses illegal deductions, including deductions for walked-tabs or cash shortages (which is illegal)!

In summary, the following chart sets forth who may be a legitimate participant in a tip pool, and what additional deduction may be taken from a server’s tips:

Conclusion

I find that restaurants are some of the most common violators of the wage laws. The good news is there are strict federal laws protecting servers. If you are receiving tips as part of your pay and you have questions about your employer’s policies, you should reach out to an attorney to discuss. One word of caution, the law in your state may be different than what is discussed in this article. Further, Herrmann Law, PLLC does not guarantee the accuracy of any article published on this website.

+Drew N. Herrmann is a labor and employment lawyer licensed to practice in Texas. Mr. Herrmann’s labor and employment law practice is devoted to representing aggrieved employees in workplace disputes.  If you have any questions or want to consult with Mr. Herrmann, he can be reached by calling 817-479-9229, or emailing drew@herrmannlaw.com or check out his website www.paycheckcollector.com

 This article is not legal advice. The information contained in this article is informational and you should not rely on it instead of legal advice specific to your situation. Drew N. Herrmann is licensed to practice law in Texas. The law in your state may be different than what is discussed in this article. Further, the law in your state may change the analysis or outcomes described in this article.

The information on this website does not create an attorney-client relationship. Any information submitted through the website does not create an attorney-client relationship with Herrmann Law, PLLC. Further, Herrmann Law, PLLC does not guarantee the accuracy of any article published on this website.

* Bussers and food runners hold positions that act in between front-of-house and back-of-house. It seems arbitrary as to where each establishment categorizes them; but depending upon their actual duties, (i.e. their level of direct customer interaction) they may or may not be included in the tip pool. Where they are categorized as back-of-house employees, they are excluded from the tip pool. For example, some food runners spend a majority of their time performing the work of an expediter and their duties “running” food are marginal. These “food runners” are more properly classified as expediters, which is a back-of-the-house job and should be not be included in the tip pool – the restaurant is responsible for properly and adequately compensating them without requiring servers to share their tips with them.

I wait tables and bitch about it on my blog, The Bitchy Waiter.

10 thoughts on “Who May Dip in the Tip Pool?

  1. Question. What about when the owner takes your tips but only gives you enough to total minimum wage ? Asking for a friend. I think this is wrong!!!

    1. Not only wrong but illegal.
      Owner either pays minimum wage or you are a tipped employee and the owner can pay that pittance, but not a combination of the two – the owner can’t have it both ways.
      Get your friend to check, learn and exercise their legal rights as a tipped employee.

  2. Justice you should do a little more research before commenting on something you clearly have no knowledge or experience in. I am a server because I am back in school and the hours are more flexible. Furthermore I often claim more than what I make because with most customers paying with credit cards the computer system automatically captures that as my claimed tips. It does not deduct the tip share pool I am obligated to contribute to. Which is generally around $20 or more a day. So I have at least $100 a week in “income” claimed to the irs I don’t actually make or bring home.

  3. Wow Justice. You clearly have no idea how things work. I have a college degree and have waited tables off and on for many years. The last restaurant I worked in, 90% of the staff had college degrees. While it may not be rocket science, service industry workers are skilled employees and it is by no means an easy job. You need common sense, a very good memory and high organizational skills. You are required to do math, you need to be educated on a great many subjects including foods, wines, liquors, geography and cultural awareness, as well as be an excellent public speaker. Most people do not possess this complete set of skills and don’t make it in the industry. People choose to work in the industry because they can make a lot of money with these skills. Maybe as a side job to pay off those student loans???? Hmmm ya. Credit card tips need to be claimed because there is a paper trail. Most people pay with cards these days. And as this article points out, the employer may impose a fee to there employees who are tipped on a credit card. So that 10% tip you are probably leaving just dwindled to 7%. Thankfully most employers do not do that and most people tip the standard. That being said, most servers I know make way too much money to qualify for public aid even if they are not reporting 100% of cash tips made. Not reporting income can have reprecussions for the employee down the line in many ways so it does not behoove them to hide all or even most of their income. It is a difficult job that is there solely to provide you, the customer, with an enjoyable experience. Clueless customers like you make that very hard to do….

  4. There should be an article about the illegality of not declaring your tips and lying about your income to rip off the taxpayer. Waiters commonly do this to collect food stamps and other income based assistance. One of the biggest problems is those people lying to defer their student loan payments, since many are flunkees from the community college that couldn’t finish their degrees and are now only qualified to pump gas or wait tables. Either the waiters are truly stupid enough to gamble their paychecks on this table waiting pig-in-a-poke, or they are liars that are ripping off their customers and the taxpayer.

    1. Or they could just go be CEOs and write off all their “expenses” in some arcane way along with their gambling and stock “losses” and other crap. That way they can drive their company into dire straits and either leave with a platinum parachute or convince the government to bail them out. And then some idiot board of directors will hire them to do the same thing with a different company. Sounds more like ripping off their customers and the taxpayer to me.

      1. Uh, I think you have your inmormation wrong, bud. Most resturaunts want you to claim at least 30% of your tips minimum. Andeven at 30% they usually have to pay money to the federal government if they don’t claim enough. Being a server doesn’t give you access to loans since you don’t have a “steady income” and a bank won’t take a chance on you defaulting on a loan (with the exception of student loans). Sounds like you just hater servers to me.

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