Toolkit — Tip Pooling

Toolkit — Tip Pooling https://wahospitality.org/wp-content/uploads/2021/08/TipPoolingtoolkit_website-3.jpg

* Updated: Oct. 19, 2021

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5 Tip Pool FAQs from employment law attorney
Catharine Morisset

 

#1 We have an owner or manager who waits tables a couple of shifts per week. Can they participate in our tip pool?

No. An owner or manager cannot participate in a tip pool. Further, having a manager wait tables suggests that the manager may be misclassified as an overtime exempt manager. That is, the manager is entitled to overtime pay. A manager must perform exempt duties, that is duties that qualify under the “executive exemption” generally 50% or more of each workweek. Waiting tables is not an exempt duty.

#2: Can owners or managers ever accept tips?

Maybe. There is a very, narrow, limited exception when an owner or manager directly provides service to the particular guest. For example, if a manager fills in as a server for an evening, the manager may keep the tips for the tables the manager directly service. That is, the tips the guest decides to give to the manager. But the business should have very clear records to prove that only the manager served those guests.

#3: Should I put our tip pooling policy in writing?

Yes. Taking the time now to create a clear, lawful, transparent, and written policy, which employees review, may save you a lot of headache down the road. The same goes if you have a service charge distribution policy.

#4: Aren’t tips, tip pools, service charges, and surcharges all different things?

Yes and No. Each has its own legal rules and risks, but there is cross over. A mandatory tip out is a tip pool. A surcharge may qualify as a service charge. Failing to understand and properly account for the differences can be costly.

#5: Can an owner or manager receive a share of a service charge?

Yes, but be careful. The rules about service charge disclosures on menus and receipts are strict. Failing to follow them means the entire service charge collected must be paid to the employee serving the customer.

Where can I get more help?

You do not have to figure out these complex issues on your own! Members of the Washington Hospitality Association have access to our Advisory Network of experts who can provide consultations on legal issues and more. Find out how our Advisory Network can help you today!

And be sure to check out the Ask A Lawyer webinar with employment law attorney Catharine Morisset of Fisher Phillips over on the Members Only Hub. Catharine discusses tips, tip pools, service charges and surcharges in greater detail.


The issue of tip pooling has evolved over the last decade with a few new developments in the last year. The association heard from several members that because of this fluidity, they were holding off on implementing tip pooling policies until federal regulations became clearer.

That clarity is finally here now that the Biden Administration has decided to retain an executive order put in place by the Trump Administration in its final days in office.

Bottom line: Operators can feel confident adopting and implementing a tip pooling policy if they want, as long as the policy meets certain requirements.

National Restaurant News: Employers may face more monetary penalties for tip theft under final rule
U.S. Labor department shift also clarifies role of managers and supervisors in tip pooling

A few key points to remember on tip pooling:

  • Make sure your tip policies are in writing and clearly understood by your entire staff. You may also want to ask them to sign an acknowledgement form like the example linked below.
  • Supervisors, managers and owners CANNOT participate in employee tip pools under any circumstances.
  • Supervisors, managers and owners may not withhold tips from employees for any reason.
  • Tip pools and service charges are different entities with different sets of laws and regulations that govern each. Make sure you and your employees clearly understand the differences if you have tip pools, service charges or both.
  • Wages are governed by laws and rules at the federal and state (and in some cases, local) levels. Always assume that the applicable law/rule for any situation you are facing is the one that is most favorable to the employee.
  • Transparency and clarity with your employees and guests on your company policies are key ingredients to avoiding disputes.

We HIGHLY encourage you to check out the Ask A Lawyer webinar with employment law attorney Catharine Morisset of Fisher Phillips. Catharine discusses tips, tip pools, service charges and surcharges in greater detail.

This is an area of employment law that is frequently subject to litigation, which can be costly and time consuming. Taking a few moments to watch Catharine’s webinar and consulting with your attorney will align your policies with the law and help you avoid litigation.

You can access this webinar on the members-only hub here.

In addition, Washington Hospitality Association members get a free, 30-minute consultation with an expert who can walk you through your tip pooling questions. Get your specific questions answered by by calling 800-225-7166.

 


 

Categories: Toolkits