Get Answers to Common Questions About the Legality of Tip Pooling

In some companies, tip pooling is par for the course – but in some cases it is actually illegal. Keep reading if you have questions about what is legal and what is not. Employment law can be complex and this does not cover every possible question you may have but it is a good start.

Is Tip Pooling Legal?

First of all, note that the laws on tip pooling changed as of March 2018. If you have been working in your job for longer than that, do not assume that you know what tip pooling is, the legal ramifications of it, or how it can be used.

Before the new law came into place, there was nothing saying that employers could not allow or require their employees to share tips as long as the tipped worker was still making the federal minimum wage, which has been $7.25 for more than a decade. The law made it illegal for managers or supervisors to take tips unless from a valid tip pool.

What Qualifies as Tip Pooling?

From a legal standpoint, tip pooling refers to taking the total amount of tips earned over a given time and dividing them amongst staff members who are not supervisors. For example, several servers may agree to pool their tips and then divide the total evenly. Legal tip pools can require servers, bartenders, bussers, counter personnel, and certain members of the kitchen staff to participate.

Requirements for Legal Tip Pooling

In order for tip pooling to be legal, it must be prearranged and all employees must be aware of it. Generally speaking, it should be in the employment contract or provided to employees when they are hired. Note that there is no requirement that tips are given out based on merit. As a result, a person who worked twice as hard as everyone else would receive the same percentage of tips.

What Are the Differences Between Tipping Out and Tip Pooling?

Tipping out, also referred to at times as tip sharing, involves servers giving a percentage of their tips to other staff members that helped them do their job. For example, they may give some of their tips to the bussers and dishwashers. Others who can receive tipping out include janitors, chefs, cooks, and bakers. If tip pooling is mandated, management can set the percentage but it is generally around 20 – 30%. Once again, this cannot include management and after tipping out, a person’s wages must still be above minimum wage.

When is Tip Pooling Illegal?

If a supervisor, manager, owner or other salaried person is involved then it is illegal. If the employer counts services charges as tips, this is illegal. If an employer holds credit card tips past payday, this is illegal. These are just a few examples – if you believe you may have been the victim of illegal tip pooling, contact an attorney for help.