Tip pool is a way restaurant and business owner can share and divide tips within their employees. For instance, waiters and waitresses can decide to gather all their tips in one pool and then split the money at the end of working days. The FLSA give employees the right to participate in a tip pool, there are however some rules which must be obeyed by both the employer and the employee. There are consequences for any employer that breaks such rules.
Under FLSA (Fair Labor Standards Act), an employer has the right to reduce the minimum hourly wage for tipped employees as long as they receive fair tips that will equate to the federal minimum wage. Employers also can claim credit for the tips which the employees have previously received as distribution and directly from any tip pool. Previously the FLSA have banned sharing of tips between tipped employees and non-tipped employees.
A change was made recently in March 2018 by the Fair Labor Standards Act which allows tip sharing between tipped employees and non-tipped employees, provided that the employer pays the minimum wage in full instead of cutting down the hourly minimum wage to employees and also doesn’t deduct any tip credit. This means that if an employer pays the minimum wage fully, employees like cooks, chefs, maintenance staffs, dishwashers, and porters can now be added in tip pools. Tip pooling is still not allowed among employees that have a subminimum wage. The new amendment made is to give employees the freedom to recover all illegally kept tips from an employer. Department of labor has the right to impose penalties on employers that refuse to pay employees their rightful tips, and this shouldn’t exceed $1100.
Tip Pool Rules
The FLSA demands that every employer must pay his employees the minimum hourly wage imposed by the federal government, if an employer decides to pay less than the required minimum wage; he must then pay his employees a tip, if you pay tipped employees less than the minimum wage it’s now called “tip credit”.
Any employer that wishes to pay his employees less than the minimum wage, the employees have the right to hold all of their tips earned. The employer should also tell the employees about “tip credit”. Tipped Employees can share tips within themselves only, non-tipped employees are excluded, and sharing tip pool with non-tipped employees is considered illegal.
Example Of Illegal Tip Pools
Some restaurant owners keep 10% of tips for administrative and handling. They pretend to hold such amount in order to cover some costs such as transaction fees. Employers can take a portion from the tip pool to cover transaction fees, but this shouldn’t exceed 3%. If any employer deducts above that you have the right to make a proper claim, in this situation the owner is trying to take a portion of tip pool for himself and is not allowed as per as tip pool rules are concerned.
Can managers take part in a tip pool?
A manager can’t be part of the tip pool, that is to say, a manager cannot be a tipped employee. According to FLSA, sometimes the manager might be considered as an employer, it is then illegal for managers to share the tip pool. There are scenarios where a manager can perform multiple roles and functions in the company before any manager is considered as part of a tip pool there are some factors that need to be considered. Does the manager have the right to hire or fire employees? How he is been paid? Is he responsible for the discipline of employees? What type of authority does he have over employees? Depending on the answers to these questions the manager might as well be entitled to share the tip pool.
What Should You Do With Illegal Tip Pool?
If an employer refuses to handle tip pool properly he can get himself into a problem. If a tip pool isn’t properly maintained, he must give the employees the standard minimum wage. If you work for any employer and he deducted some percentage of the tip pool, during the time he made those deductions, he owes the remaining balance that makes up to the minimum hourly wage. Let’s explain this further, supposing an employer pays an employee $3.7 per hour for about 4 weeks and kept some percentage from the tip pool like 10%, your employer owes you the difference between the “tip credit” and the minimum hourly wage and all accounts must be settled properly or you have the right to make claims.
If you believe your employer is unjust with tip pool you should try to reason with him and if not you can hire an attorney that will help you make a proper claim. If you’re having any dispute between you and your employer regarding tip pool contact Massey & Duffy so that they can guide you on how to deal with the matter.