Illegal Tip Pooling

 In Overtime Law, Wage Law

What is Illegal Tip Pooling?

In any industry where tips are customary, like in the restaurant and service industries, employers are allowed to engage in what is called “tip pooling.” Tip pooling means that employees who receive tips are required to contribute tips to tip share or tip pool. The pooled tips may then be used to pay other employees who contributed to the service that resulted in the customer leaving the tip.

When employers use tips to pay employees, they must follow very specific laws governing the payment of wages and tips. Failure of an employer to follow the specific laws and rules will result in the employer being punished with severe fines and required to pay damages and other compensation to the employees who contributed the tips to the tip pool.

Federal Law Prohibits Illegal Tip Pooling

For example, certain employees CANNOT be paid with tips from tip pooling. Only employees who customarily receive tips can be included in a tip pool. Thus, some examples of employees who CANNOT be paid with tips from a tip pool are:

  • Dishwashers and cleaning staff
  • Cooks and kitchen workers
  • Owners, managers and other supervisors
  • Security personnel (like a tavern or bar “bouncer”)

If such employees have been included in your tip pooling, then your employer violated the federal wage and tip law. If you think your employer has engaged in illegal tip pooling, call us. We are top-tier worker-focused attorneys that can help you vindicate your rights as an employee and punish your employer for unlawful activity.

If an employer CORRECTLY establishes a tip pooling arrangement, then the employer is eligible to use something called the “tip credit” to satisfy the employer’s obligations to pay the minimum wage. This allows an employer, for example, to pay cash wages of $2.13 an hour while taking a credit of $5.12. That is based on the current federal minimum wage of $7.25 an hour. This saves an employer $5.12 per hour in cash wages. Note that many states have a high minimum wage and some states do not allow tip pooling or use of the tip credit.

In any event, if a tip pooling arrangement is later found to be unlawful and illegal, then the employer WAS NOT ALLOWED to take the tip credit. Thus, using the example from above, the employer will owe its employees $5.12 per hour for all hours where the tip credit was being unlawfully used.

This is what happened to a restaurant in Charleston, South Carolina. See media report here. The federal Department of Labor charged the restaurant with requiring tipped employees to share tips illegally, allowing the pooled tips to be paid to management and other typically non-tipped employees. The 92 workers were shortchanged a total of $624,017 and the employer is being forced to pay the back wages and penalties.

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 violated your rights as an employee, call us. 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.

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