Tip for restaurants this summer: Stay out of the pool (tip pool, that is)
National Waitstaff Day was May 21, on the cusp of summer’s busy travel season when many people will be dining out at restaurants, coffee shops, and cafes across the country.
Those in the restaurant industry face many challenges, including:
- Recruiting, hiring, and retaining workers
- Staffing for long days
- Managing high food costs
- Dealing with difficult customers
Sometimes restaurants compound their troubles by either intentionally or unintentionally violating wage and hour laws, which can lead to fines and other issues.
Employers, managers, and supervisors may NOT keep employees’ tips
The federal Fair Labor Standards Act (FLSA) prohibits employers from keeping any portion of employees’ tips, whether or not there’s a tip pool or an employer takes a tip credit.
In other words, employers may not require employees to share their tips with an employer, a supervisor, or a manager, even when a tipped employee receives at least the federal minimum wage (currently $7.25) per hour.
Managers and supervisors include those:
- Whose primary duty is managing the enterprise or a customarily recognized department or subdivision of the enterprise;
- Who customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
- Who have the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing are given particular weight.
Business owners who own at least a bona fide 20 percent equity interest in the enterprise in which they are employed and who are actively engaged in its management are also managers and supervisors who may not keep employees’ tips.
An exception to the rule
A manager or supervisor may keep only those tips that they receive directly from a customer for the service they directly and solely provide.
For example, a restaurant manager who serves their own tables may keep their own tips from customers they served but would not be able to receive other employees’ tips by participating in a tip pool.
Burger restaurant grilled on tip rules
In May, investigators with the U.S. Department of Labor’s Wage and Hour Division found that the owners and operators of a chain of burger restaurants in Oregon and Washington required employees at 14 locations to share a portion of their tips with managers, an FLSA violation.
Investigators determined the employers knew about federal regulations for tip pools but willfully required workers to share their earned tips.
The employers were ordered to pay $148,248 in tips illegally withheld and an equal amount in damages to 581 workers and prohibited from future violations. The employers also must pay $20,000 in penalties assessed by the department for their willful violations.
Key to remember: The federal Fair Labor Standards Act prohibits employers from keeping any portion of employees’ tips, whether or not there’s a tip pool or an employer takes a tip credit.