GRA Tip of the Month l Tipping & Tip Pools: Make Sure You're Getting It Right

Tipping & Tip Pools: Make Sure You're Getting It Right

Tips are an important part of compensation for many restaurant employees, but the rules surrounding tip credits, tip sharing and tip pools can be complicated. Even a well-intentioned policy can create compliance problems if it isn't structured correctly.

Here's what you need to know:

Tips belong to employees. Under federal law, employers cannot keep any portion of an employee's tips, whether or not they take a tip credit.

Who can participate in a tip pool depends on how employees are paid. If an employer takes a tip credit, a mandatory tip pool generally must be limited to employees who customarily and regularly receive tips, such as servers, bartenders and bussers.

If an employer pays employees the full federal minimum wage without taking a tip credit, a tip pool may also include certain traditionally non-tipped employees, such as cooks and dishwashers.

Managers and supervisors require special attention. Under federal law, managers and supervisors cannot receive money from a tip pool, even if they regularly perform tipped work. They may keep tips given directly to them by a customer for service they directly and solely provide.

GRA Recommendation

Take time to review your restaurant's tipping practices, particularly who contributes to a tip pool, who receives money from it, how tips are distributed and whether you take a tip credit.

Tip rules can be highly fact-specific, and mistakes can lead to back wages, repayment of improperly kept tips, loss of the tip credit, penalties and other liability. If you have questions about whether your restaurant's tipping or tip-pooling practices comply with the law, GRA strongly encourages you to speak with an employment attorney who can review your specific policies and practices.

Need help? Start with the GRA Legal Center. Through this new member resource, GRA can connect restaurant operators with an attorney for a 15-minute consultation to discuss their legal questions and help determine the appropriate next steps.

A quick review of your policies today can help prevent a much larger compliance issue down the road.