For employees who receive tips as part of their compensation, tip pooling is one way to distribute gratuities among all staff. However, in some cases, management may allocate tip pool funds illegally.
It is important to understand if your workplace's tip pool distribution meets the required standards.
Who is participating in the pool?
Tip pools should only include customarily tipped employees, including servers, bartenders, hosts and bussers. Some non-tipped employees may participate, but management and salaried employees may not. If salaried managers get a cut of the tips, that's a red flag.
How are tips distributed?
There are acceptable ways to allocate tip pool funds, such as dividing it evenly among participants or basing it on number of hours worked. As long as the method is clearly communicated in a proper tip notice that is given to each employee, and applied consistently, it can be valid. Watch for unfair practices, such as paying servers less than bussers.
Are you meeting minimum wage?
When you combine your tipped income with your regular wages, you must earn at least the federal minimum wage of $7.25 per hour or your state’s current minimum wage. If the tip credit drops you below this rate, the tip pool may be taking too much. Keep records of your hours and pay stubs to evaluate.
Is there transparency?
You should be able to easily review records related to the tip pool if you request them. Lack of transparency around the total tips collected or the distribution could mean something improper is happening.
Tip pooling can benefit staff when executed fairly. If you have concerns about your workplace's tip allocation, reach out to the experienced employment attorneys at USA Employment Lawyers for your free case evaluation.
