Toolkit — Tip Pooling

Toolkit — Tip Pooling

* Updated: Aug. 11, 2021

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.

Federal Tip Pool Rule Change Welcomed by Industry

It is now legal to tip pool.

On March 23, 2018, Congress passed critical funding legislation that included repealing the tip pool rule that barred certain employers from setting up tip-pooling arrangements where tipped employees can share tips with their non-tipped colleagues.

Everything you need to hit the ground running is below.

April 6, 2018: The Department of Labor issued a field bulletin further clarifying the change.

The bill also included a provision that ensures workers receive all of their tips. Supervisors, managers and owners are not allowed to benefit from a tip pool.

The new rule allows employees who do not traditionally receive direct tips, such as restaurant cooks and dish washers, to participate in mandatory tip pools. These heart-of-the-house employees contribute to the overall guest experience, and under the rule they also benefit when guests reward for that experience. Read our statement on this issue from President and CEO Anthony Anton here.

Contrary to some media reports, tips in Washington state have always been the property of employees and the proposed tip pool rule would not allow Washington employers to retain tips. Case law and Washington’s new minimum wage law, under Initiative 1433, identifies tips and gratuities as the property of employees. Owners and managers are also legally prohibited from benefiting from tip pools.

Increasing labor costs and other new mandated costs present significant challenges to Washington restaurants, which operate on extremely narrow profit margins. Tip pools help alleviate disparities in compensation within a restaurant’s team. Allowing heart-of-the-house employees to benefit when guests tip is the right thing to do because heart-of-the-house employees also contribute to the success of the guest experience.

Do you still have questions about tip pooling? Washington Hospitality Association members get a free, 30-minute consultation with an expert who can walk you through the process. Get your specific questions answered by by calling 800-225-7166.

Two Minute Update on Tip Pooling:

Categories: Toolkits