Does Your Tip Pool Comply With Federal Law?

For many workers, a large percentage of their pay comes in the form of tips, especially in the hospitality and restaurant industries. Often the tips earned over the course of a shift are pooled, and then distributed among the workers.  However, federal law (the Fair Labor Standards Act – FLSA) has very specific requirements concerning tip pools.  An employer’s failure to follow these guidelines, may constitute a violation of the FLSA and deprive workers of their hard earned compensation.

Pursuant to the FLSA employers must pay each worker at least minimum wage.  Where employees regularly and customarily earn tips, this can be as low at $2.13 as long as the employer follows two critical rules.  First, the employer must pay the worker a tip credit which when combined with the hourly wage equals at least minimum wage.  Further, the employee must be able to keep all of the tips he or she earns, or alternatively receive a split from a tip pool that combines all tips earned from all tipped workers for a particular shift.  Employers may violate federal law by allowing non-tipped employees to share in the pool.  For example, while waitstaff are generally considered to be tipped employees, restaurant managers are not.  However, other positions may be tricky, such as coffee servers and food prep workers. If non-tipped workers share in the pool, the wages tipped workers receive may be unlawfully decreased.

Rules concerning tip pools and tipped employees can be complex and confusing.  If you have any questions or are concerned that you have not been receiving all the pay you are entitled to, please contact the Atlanta wage and hour attorneys at Buckley Bala Wilson Mew LLP for an immediate case evaluation.