Colorado Tip Pooling Law Requires Customer Disclosure

Do Customers Deserve Notice that a Restaurant is Pooling Tips?

The answer varies by state, but for restaurants in Colorado, the answer is yes—the Colorado tip pooling law requires restaurants to notify customers of any Tip Pooling arrangements.

We here at Herrmann Law, think this is a net positive for workers in Colorado and should be encouraged in other States. Restaurants commonly abuse tip pools and illegally use tip pools to fund the restaurant’s business expenses. For example, it is common for restaurants to require servers to “tip out” a portion of their sales each shift to a tip pool. However, employers often intentionally conceal how the pooled tips are used or distributed—or when employer does disclose how the tips are used, they do not actually use the tips as they said they would.

Tip Pooling Laws

To be valid under federal and most state laws, an employer may only use tips from a tip pool to pay customarily tipped front-of-the-house workers like wait staff, bartenders, servers, etc. If a tip pool includes non–tipped back-of-the-house employees like kitchen staff, expeditors, or other employees who do not have direct contact with customers, then the tip pool is invalid. In addition, regardless of customer interaction, owners and managerial staff can NEVER participate in tip pooling.

One emerging trend in protecting traditionally tipped workers such as servers and bartenders is a requirement that restaurants provide customers with conspicuous notice of any restaurant requires tip pooling among servers and bartenders. Tip pooling involves an employer’s decision to pool all tips received by certain-defined employees and then to divide that pool among the workers.

Tip Pooling Disclosure is Required in Colorado

As noted, there is an emerging trend where state labor laws require disclosure to customers that tip pooling is being practiced.

For example, in 2019, Colorado became the first state to require such disclosure! Under Colorado law tips received by a worker are the sole property of the worker receiving the tips. And tip pooling in Colorado is unlawful unless there is a conspicuous disclosure informing customers of the tip pooling arrangement. “Conspicuous” means the notice of tip pooling must be posted in writing, in an easily-readable, large font and in more than one location — such as on the menus, on tabletops and on signs affixed to walls or doors.

In Colorado, if disclosure of the tip pooling arrangement is not provided, then the tip pooling arrangement is prohibited. Under federal and other state laws, tip pooling impacts an employer’s ability to use what is called the “tip credit.” If the tip pooling arrangement is invalid, then the employer cannot use the tip credit.

The tip credit permits an employer to use part of a worker’s tips to satisfy the employer’s obligations to pay the minimum wage. In Colorado, this would mean the employer would owe the difference between the tip minimum wage ($8.98 in 2020) and the full minimum wage ($12.00 in 2020). Put another way, if you work in Colorado and your employer does not follow the tip pooling laws—including providing customers notice of any tip pooling arrangement—then you would be entitled to the full minimum wage for each hour worked, plus triple damages, plus any misappropriated tips. Finally, your employer is responsible for paying your attorneys’ fees and costs, which allows us to handle your case on a contingency basis.

Tip Pooling must also comply Federal Law

If you work in a state that has not passed any state tip pooling laws such as Texas, you are still protected by a federal law known as the Fair Labor Standards Act. Under federal law, the current minimum wage is $7.25. An employer can pay a cash wage $2.13 per hour and still satisfy the minimum wage requirement by using the worker’s tips if there are at least $5.12 per hour in tips.

Under federal law, if the tip pooling arrangement is invalid, then workers are entitled to be paid a cash wage of the full minimum wage. In other words, if the tip pooling arrangement is invalid, then servers are entitled to recover their unpaid wages in the amount of $5.12 per hour, plus double damages, plus any misappropriated tips. Similar to Colorado, your employer is also responsible under federal law for paying your attorneys’ fees and costs, which allows us to handle your case on a contingency basis.

Call the Employee Rights Attorneys at Herrmann Law Today

For more information, call the Employee Rights attorneys at Herrmann Law. If you think that your employer has engaged in illegal or invalid tip polling, you may have a wage claim. Call us. Your right to be paid your FULL wages can be vindicated. We are proven, experienced, employee-focused attorneys representing workers across the United States in all types of workplace disputes. Use our Online Contact page or call us at (817) 479-9229. We are more than just a law firm for employees – we are an employee’s fiercest advocate, equipping employees with the legal representation needed to achieve the best result possible.