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.

For up-to-the-minute information on tip pool policy or tip pooling laws, call Senior Communications Manager Jillian Henze at 360-956-7279 ext. 124.

Two Minute Update on Tip Pooling:

Dine NW Podcast with Catharine Morisset on Tip Pooling:

Dine NW Podcast with Bob Donovan on Tip Pooling:

From the Archives:

June 29, 2016: Restaurateurs should not wait until July 10 to evaluate what is at stake with tip pools. Attorney Bob Donovan reminded members in the webinar below that an individual employee could still file a private lawsuit against an employer over tip pool practices even while DOL enforcement is stayed. If the employee were to prevail, there could be a significant lookback period. And “if the DOL rule stands, it is also uncertain if restaurateurs would have a solid defense to exemplary damages if employees claimed that their tips were unlawfully pooled during this period of uncertainty,” says Attorney Catharine Morisset of Fisher & Phillips LLP. READ MORE


Webinar with Bob Donovan on Tip Pooling:



Some previous articles on this issue:

A brief overview of the Ninth Circuit ruling

How the Ninth Circuit ruling may affect your restaurant

Videos on this issue:

Webinar and Q&A with Bob Donovan

Two Minute Update!

Additional Resources:

DOL Wage and Hour Division Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (FLSA)

The HERO Manual on Service Charges

Expect to Hear News on Tip Pool Lawsuit By Next Fall

Learn about the federal and state laws governing service charges:

Lessons in No-tipping: This recent association article looks at how several Seattle-based restaurant groups have shifted away from tipping.