I'm the personnel manager at a local chain of pubs. We pay a lower minimum wage to employees who earn tips, like wait staff and bartenders, but they receive large amounts in tips that bring their take-home pay to well above the minimum wage. Our company really values teamwork, and we want to create a fair system where everyone benefits from tips left by satisfied customers. Can we require tipped employees to pool their tips with the back of the house (dishwashers and cooks) and shift supervisors?
The rules for tipped employees have been confusing up until now. However, the federal Fair Labor Standards Act was recently amended to clarify when tip pooling is legal and who may participate in the pool.
To start, you have the basic rule of tips right: It is perfectly legal—in most states—for an employer to pay tipped employees less than the regular minimum wage per hour, as long as the employee earns enough in tips to make up the difference. However, this practice, called taking a "tip credit," is not allowed in some states (including California). And, some states allow a smaller tip credit than the one allowed by federal law. So you should double check your state's tipping rules.
When it comes to tip pooling, though, your company's plans will run into some legal problems. Tip pooling—in which tipped employees contribute a portion of the their tips to a pool, which is distributed among a group of employees—is generally legal. However, under federal law, managers and supervisors are not allowed to participate in a tip pool. This is true regardless of whether your company takes a tip credit or pays employees the full minimum wage.
Back of the house employees, such as cooks and dishwashers, may participate in a tip pool, but only if the employer doesn't take a tip credit. Because your company takes a tip credit for wait staff and bartenders, your company cannot require those employees to share their tips with non-tipped coworkers. However, if you decide to pay all employees at least the full minimum wage, you can create a tip pool that includes all non-supervisory employees.
Some states have stricter rules for tip pools. Select your state from our tipped employees page to learn more.