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Update: Tip Pooling by Restaurant Owners is Guided by Tip Income Protection Act of 2018

When we last looked at tip pooling at restaurants and who would be permitted to be included, the laws and regulations were in flux.  Since then, the Tip Income Protection Act of 2018 was signed into law.  Among other things, in instances where the employer is paying full minimum wage and does not take a tip credit, the Act permits servers to pool tips with cooking staff, dishwashers, and other “back-of-house” staff who were traditionally underpaid (as compared with the customer facing employees).  The Act also explicitly prohibits restaurant owners from keeping “tips received by its employees for any purpose including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit” and there are increased penalties for doing so.  All involved seemingly declare victory as employees are better protected against owners collecting their tips and are closer to pay equality, while employers are seeing higher rates of retention and more harmonious work environments.

Restaurants sharing tips between tipped employees and non-tipped employees (servers and kitchen staff for example) must pay all employees the full minimum wage amount.  If a restaurant opts to take a tip credit and not pay employees the full minimum wage amount, their non-tipped employees are not permitted to participate in a share of the tips.  In these instances, when the employee isn’t making enough in tips to meet minimum wage, restaurant owners must make up the difference.

A word of caution to restaurant owners, the terms “supervisor” and “manager” were not defined in the Act and the roles and responsibilities of these employees can vary from restaurant to restaurant.

Periodic review of tip pooling policies and implementation with counsel to insure compliance with all applicable requirements (including state laws that may be more restrictive) is always a smart plan of action.