Employers Can’t Take a Dip in the Tip Pool

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Photo credit to d.k. peterson.

If you work for tips, like waiters or bartenders, you probably make less than minimum wage.  That’s because tipped employees can be paid as little as $2.13 per hour, but only if the combination of their hourly pay and their tips is at least as much as the minimum wage (currently $7.25 per hour).  The Fair Labor Standards Act (the “FLSA”) refers to this add-on to the $2.13 per hour as a “tip credit.”  An employer has to tell tipped employees about the tip credit, and is not allowed to require employees to hand any of their tips over to the company, except as part of a “tip pool.”  Employees who are a part of a tip pool put all of their tips together, and the tips are then divided among the group of tipped employees.  This means that each waiter or bartender receives the same amount of tips every shift, even if another co-worker received larger tips that night.

Yet it is important to note that only employees who regularly receive tips can participate in tip pools.  This means that tipped employees can’t be required to share their tips with dishwashers, bussers, chefs, or others who do not receive tips.  However, tipped employees still may be required to “tip out” some of these non-tipped employees.  Additionally, tip pool participants may not be “employers” as defined by the FLSA.  This means that supervisors, managers and owners are usually are not allowed to receive any of the money put into the tip pool.

If an employer takes money from a tip pool, it is a violation of federal law.  If an employer violates this section of the FLSA, the employee is entitled to two times the amount of their unpaid wages.  These unpaid wages include not only the money that was directly taken from a tip pool, but also the difference between what the employee was paid for the minimum wage when the employer was violating the tip pool.

If you think your company is illegally taking money out of your tips, you should consider seeing a lawyer.  The Gowen Group Law Office handles employee wage cases, including violations of the FLSA. You can contact us here.

Law Clerk Stephanie Sautter contributed to this post.