Tip Pools: Making Sure Your Tips are handled the Right Way

Improperly handled tip pools can cause a lot of pain for restaurant owners. With a spate of recte tip=-pool based lawsuits, many restaurant owners are worried about the handling of their restaurant’s daily tips. Don’t worry, though, it’s a lot simpler to run have an effective tip jar that’s legally protected than one might think.

Tip Pools are an Easy Way To Incentivize Employees When Handled Effectively

To start, let’s look at the definitions for tip pooling and tip sharing as outlined by the Fair Labor Standards Act. Tip pooling is defined as “A collection of tips divided among employees who regularly receive them.” These are most common in environments where it’s not necessarily clear for whom a tip is meant. This includes bars, coffee shops, ice cream parlors, delis, and other counter service operations.  Tip sharing is defined as “any practice where tipped employees give a percentage of their tips to other employees, such as bartenders or table bussers for their role in service.” These is not an uncommon practice in more traditional sit down and eat settings, and is completely legal under any circumstance where employees are not forced to share their tips with any employee who does not engage in customer service work, such as kitchen or janitorial staff.

For your tip pool, you’ll want to keep a few things in mind; for starters, only employees who regularly and customarily, as required by their job duties, are allowed to share in the tip pool. This, like in the case of tip sharing, prevents kitchen or janitorial staff from unfairly taking the wages of the service staff.  In that same vein, employers are not allowed to participate in tip pools. This is where stuff can get a little bit tricky though, as the line between employer and employee can be a bit smudged and fuzzy at times.  Thankfully, the Fair Labor Standards Act gives us a definition that’s easy to work with. “An employer is any person acting directly or indirectly in the interest of an employer in the relation to an employee.” Simply put, if a person has the ability to hire or fire employees, to control the schedule, or determine the pay rates of another person, they are an employer and cannot participate in the pool.

Make Sure Your Tip Pool is up to Snuff

It seems pretty simple, doesn’t it? Even still, a number of restaurants are utilizing their tip pools incorrectly, so it never hurts to check. It could save you quite the hassle.