What Is Tip Pooling, and is it Legal?

If you’ve worked in the service industry at any point, you know it can be a grind.

You pride yourself for offering service with a smile knowing there’s a potential of extra compensation at the end of your encounter with each customer.  Whether you are a bartender, wait staff, or part of the bussing or host teams, you might work harder knowing there could be a tip coming your way.

In some areas of service, such as coffee shops, frozen yogurt shops, pizza places, restaurants, salons, car wash, and valets, employees sometimes will pool their tips together to make sure they collectively receive an equal share for their hard work.  But there are some instances in which tip pooling is illegal.   The Carter Law Firm, an Orange County employment law firm, wants to explain to service professionals the ins and outs of tip-pooling and when it violates the law.handing bills to people

What Is Tip Pooling?

Tip pooling is a practice where people in positions to receive tips agree to contribute all tips from a shift into one collection, equally distributing the money at the end of the shift. This usually includes wait staff, bartenders, and bussers. In some cases, where tips are collected, employers can pay wages to tipped employees that are below minimum wage, if the tips bring them back above that level.

What Are the Laws Regarding Tip Pooling?

The U.S. Department of Labor revised the Fair Labor Standard Acts in 2018 and issued this statement regarding tip pooling.

The employer must notify tipped employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each tipped employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.

In a 2019 lawsuit (Black v. DMNO LLC, E.D. La., No. 2:16-cv-02708 (May 21, 2018), one group took on a restaurant in Louisiana for allegedly not complying with the law.  The eatery, Doris Metropolitan, enacted a tip pool.   In an attempt to follow the FLSA guidelines, Doris paid its servers a reduced hourly wage and an equal share of a tip pool collected during each shift.  

The restaurant then allocated the tips as follows:

  • Servers received 65 percent
  • Server assistants received 25 percent
  • Service captains received 10 percent

The servers sued, claiming the tip pooling was illegal because the service captains were actually managers, and Doris was using the tip pool to subsidize their salaries by allocating 10 percent of the tip pool to them.  The court determined that the restaurant employer was liable for those instances where the infractions occurred.

Getting Help

Are you subjected to tip pooling at your place of work?  If so, those dollars should be returned to you and other workers in the chain of service.  None of those funds should go to management.

The Carter Law Firm fights for employees, and we understand that many employees are often confused about tip pooling and whether or not they are being operated legally.  If a manager is taking any part of your tips, it is likely illegal.