Can you require tip-sharing?

All too often a court’s decision does not jive with history and confuses the issue more, but thankfully, not today. If you’re running a company with tipped employees, your job just got easier.

In a recent court decision it was declared that employers of tipped employees have the right to establish tip-sharing policies. In the case, the waitstaff at Vita Cafe was required to share customer tips with the other restaurant employees (including dishwashers who were not earning tips themselves). A waitress at the restaurant claimed this action violated the Fair Labor Standards Act (FLSA).

However, because the employer was not using tips as credit toward the minimum wage (the restaurant actually paid full minimum wage making the tips a bonus on top of that wage), their policy was declared legal. If you want to establish a policy to enforce tip sharing, here are some tips from our partners at Schwabe Williamson & Wyatt that will help you stay in compliance:

  • Put your policy in writing
  • Pay at least the higher of the federal or state mandated minimum wage
  • Do not include managers or owners in the tip pool
  • Check out what your state laws say about tip pooling.

Click here for state specific tip-pooling information from the Department of Labor.

You can learn more about this topic by reading “Ninth Circuit Approves Certain Tip Pooling Arrangements” by Schwabe Williamson & Wyatt. Click here to read the article.


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