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Tip Pooling: Is Now Permissible

On Behalf of | Jun 4, 2018 | Business And Corporate Law

In March, the U.S. Department of Labor’s Wage and Hour Division issued a Field Assistance Bulletin that announced a rollback in the tip credit rules under the Fair Labor Standards Act (FLSA).  This changes the way Washington employers can administer tip-pooling in their businesses.  Under the rollback, “back of house” employees (e.g., cooks, bussers, or even stock clerks), can now benefit from—and even share—tips with “front of house” employees (e.g., wait staff, food and beverage servers).  So whether you own a winery, restaurant or other business that employs staff who receive tips, it is important to understand your tip-pooling options.

What Does This Mean for Employers?

With this rollback, employers now have the option to implement back of house tip-pooling and can implement a policy that shares tips received by front of house staff with back of house individuals. However, back of house tip-pooling is entirely optional: employers are not required to adopt this change.

Employers that choose to adopt this change may select any method to disburse the funds. Some employers may elect to have the front of house employees choose how much they tip back of house staff, while others may elect to disburse a certain pre-defined percentage from all staff to back of house workers.

However, tip-pooling can be a trap for the unwary.

Regardless of the tip-pooling method chosen, the change in the FLSA has other stipulations employers should be aware of:

  • The FLSA prohibits employers, managers and supervisors from participating in tip pools
  • Employers can also withhold certain fees and costs from pooled tips (such as credit card processing fees if tip was paid via credit card), but not others
  • The FLSA also contains a monetary penalty for violations that employers should be aware of

To learn more about these changes or how tip-pooling may impact your business, visit the U.S. Department of Labor’s website, refer to the published Fact Sheet or contact an attorney at JDSA Law.