It is common practice among restaurants and other hospitality businesses
to participate in tip-pooling. The act of tip pooling describes a procedure
wherein all tipped employees put their tips together and the tips are
then split amongst the employees. Despite the commonality of this practice,
there are several legal discrepancies that many are unaware of.
While Colorado law may permit the participation of everyone in a tip pool,
the Federal law does not. If you are only in compliance with Colorado
law this could leave you open for potential suit under the Federal statutory
According to the Fair Labor Standards Act “FLSA”, managers
and supervisors cannot be included in a tip pool. Outside of managers,
supervisors, and employers, the determination of who can participate in
the tip pool depends on whether or not the employer takes a tip credit.
29 U.S.C.S. §§ 201 et. seq.
A tip credit allows employers to pay tipped employees a wage lower than
the federal minimum wage. The idea behind the tip credit is that tip income
should bring the employee’s wages back up to the federal minimum
wage. If an employer takes a tip credit, additional restrictions on who
can participate in the tip pool apply, such that only those employees
who customarily and regularly receive tips can be in the tip pool.
Turner v. Millennium Park Joint Venture, LLC, 767 F. Supp. 2d 951 (N.D. Ill. 2011). In other words, only employees
who maintain more than a de minimus interaction with customers as part
of their employment and those employees who are ordinarily engaged in
personal customer service may participate in tip-pooling. Employees who
customarily and regularly receive tips might include waiters, waitresses,
bartenders, bellhops, and counter personnel. If you take a tip credit,
you cannot include people in the pool who don’t normally receive
tips, such as dishwashers, cooks, chefs, and janitors.
Pedigo v. Austin Rumba, Inc., 722 F. Supp. 2d 714 (W.D. Tex. 2010). The perfect example of a Federally
permitted tip-pool is one wherein the waitstaff, bartenders, and bussers
pool tips, however, if the kitchen staff is included in the tip pool and
they do not maintain the required de minimus interaction with customers
the employer may be at risk for a potential lawsuit. If an employer does
not take a tip credit they may include tipped and non-tipped employees
in the tip pool as long as the tipped employees are paid at least the
full federal minimum wage.
Platek v. Duquesne Club, 961 F. Supp. 831 (W.D. Pa. 1994).
If you own a restaurant or you work in a restaurant where tip-pooling is
already implemented or if tip pooling is a consideration in the future,
there needs to be a clear policy in place. Our knowledgeable and experienced
attorneys have a wealth of knowledge on Colorado and Federal wage laws
and can assist you in developing such a policy or explaining the ramifications
of such a policy. If you have any questions about tip pooling and whether
a policy is in compliance with both Colorado and Federal law please
contact our office today.