You have just clocked out after a busy shift serving tables, and your pockets are a little heavier thanks to generous tips. Can your employer demand a cut of those earnings? Understanding the laws surrounding tip sharing is crucial for both employers and employees.
Federal law prohibits employers from keeping employees’ tips
Under the Fair Labor Standards Act (FLSA), gratuities or tips belong to the employee who directly receives them, not to their employer. That said, employers cannot:
- Deduct credit card processing fees from tips
- Use tips to offset wages
- Require tip pooling with managers or supervisors
- Take a percentage of tips for the house
This rule applies whether or not the employer uses a tip credit to meet minimum wage requirements.
It is crucial to note that the law does allow for tip pooling among employees who provide direct table service. This means servers, bussers and bartenders can share tips, but kitchen staff, dishwashers and managers cannot participate in the pool.
Ensuring every move is compliant with the law
Employers must be careful when implementing tip pooling arrangements. They must ensure the pool is fair and equitable, and they cannot use it as a way to subsidize non-tipped employees’ wages.
Employers who engage in this illegal practice may encounter significant penalties. These may include fines, back pay and, in some cases, even criminal charges.
If you believe your employer is illegally taking your tips or forcing you to share them improperly, it is important to know and exercise your rights. Consulting an experienced attorney is often advantageous. Your attorney can guide you on how to address any employment-related issues with your employer and, if necessary, help you pursue legal action.