Tip Pooling Laws Could Soon Change, Here’s What You Need to Know

By Douglas Lipsky

Is it legal for restaurant owners to distribute tips to non-tipped employees?

Tips make up a large percentage of most restaurant workers pay.  In New York City, the minimum cash wage for food service workers is presently set to $8.65 per hour for larger employers and $8.00 for smaller employers.  Tipped workers must receive at least a $4.35 tip credit per hour for big employers or $4 an hour for smaller employers.  On a national level, the federal minimum cash wage for food service workers is just $2.13 an hour, with tips required to equate to at least $7.25 per hour.  With such low minimum wages in the food service industry, ensuring tipped employees receive their earned funds is of critical importance.

Change Could Be Coming to Tip Pooling Laws

Recognizing the importance of tips to restaurant workers, the Obama administration passed a law in 2011 that makes it unlawful for employers to collect tips and distribute them to non-tipped employees.  Under the law, it would be illegal, for instance, for an employer to collect the tips of tipped employees and pay a portion to the back of house workers, who are not typically classified as tipped employees.  Tip pooling amongst food service workers like waiters, bussers, hosts, and bartenders is considered lawful.

In December, the Trump administration proposed changes to the current tip pooling laws.  The proposed changes would potentially permit restaurant owners to collect and distribute tips at their discretion.  Employers could distribute tips to non-tipped workers or even theoretically keep them so long as their employees are paid at least the federal minimum wage of $7.25 an hour.  The proposal is currently moving towards enactment and if accepted would reverse tip pooling standards to be more in line with laws pre-2011.

Both supporters and those in staunch opposition to the law commented during the now closed public comment period. Some believe the law could help to close the so-called wage gap between the front of house servers and back of house employees. After all, a restaurant depends on all its part.  On the other hand, many restaurant workers fear the law could lead to essential theft of their hard earned tips.

Tip Pooling Leads to Considerable Litigation

Restaurant workers are considered a vulnerable group for wage abuse.  If you are a restaurant worker and you believe your employer is unlawfully distributing your tips or paying you less than minimum wage, you can take action.  Contact an employment law attorney at Lipsky Lowe for assistance with protecting your legal rights.

About the Author
Douglas Lipsky is a co-founding partner of Lipsky Lowe LLP. He has extensive experience in all areas of employment law, including discrimination, sexual harassment, hostile work environment, retaliation, wrongful discharge, breach of contract, unpaid overtime, and unpaid tips. He also represents clients in complex wage and hour claims, including collective actions under the federal Fair Labor Standards Act and class actions under the laws of many different states. If you have questions about this article, contact Douglas today.