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New federal laws reinforce California tip rules

People outside the restaurant business are often surprised by the complex and heated controversies over tipping that can arise among employees and with management. When laws change, or management tweaks the house rules, tense debates often begin anew.

To keep the peace, as well as stay out of legal hot water, the best a restauranteur can do is comply with the current laws and adjust your policies as laws change.

Nationwide, back of the house now might share the pool

Early last year, the federal Fair Labor Standards Act (FLSA) was amended to allow tip sharing with the “back of the house” nationwide. This and other changes iterated and strengthened the enforceability of existing California laws.

California restaurants have the option of pooling tips among front-of-the-house servers like table servers and bartenders, or to also include back-of-the-house employees with little customer contact such as chefs and bakers, cooks, dishwashers, janitors, etc. The distribution should be “reasonable,” with staff who interact with customers most receiving the biggest slice of the tip pie.

Federal law now allows this option only if everyone is paid the minimum wage and no tip credit is taken. California already requires the applicable minimum wage and bans tip credits.

No management or supervisors allowed in the pool

Under the new federal rules, managers and supervisors can’t take any tips or be included in the pool in any way under any circumstances. It doesn’t matter if supervisors, managers or owners help serve or interact with customers. They still can’t get a cut of tips, even of those given directly to them.

Tip and wage rules in the restaurant and hospitality industry are notoriously complex and contentious. Owners and managers can protect themselves and their business by developing an ongoing business relationship with a qualified attorney and learning to follow the twists and turns of the laws that apply to your workplace.