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Tip Pooling under the FLSA

Next time you go to an Atlanta sushi or other nice restaurant, notice the side conversations among the staff. Much of the time, it concentrates on tips, taxes, and other paperwork that most restaurant workers know little or nothing about.

If you work for tips, one of the more disliked conventions in the hospitality business is the practice of tip pooling, where the wait staff makes the tips and then is mandated to share them with the host staff, bus staff, etc. This is different from the wait staff voluntarily giving a percentage of tips to their co-workers, and has tax and other implications. This practice has its own set of rules for both employers and employees, and is easily abused by employers looking to save a few bucks here and there.

One recent interesting DOL opinion letter focused on a set of cooks in a Japanese restaurant, who really don’t seem to immediately fall into one of the DOL’s allowable mandatory tip pooling categories.

Tip pooling is only allowed under the FLSA for certain occupations. According to the DOL, the following occupations have been recognized as falling within the eligible category for tip pooling: waiters and waitresses, bellhops, counter personnel who serve customers, busboys/girls, and service bartenders.

Tipped employees may not be required to share their tips with employees in occupations which have not customarily and regularly participated in tip pooling arrangements, such as janitors, dishwashers, chefs or cooks, and laundry room attendants.

So where do sushi and those table chefs at a Japanese steakhouse fit into that?

The opinion letter concludes with the notion that these chefs should participate in tip pooling, for a number of reasons. They earned more than $30 per month in tips themselves; they heavily interact with customers; and the servers acted more as assistants to the chefs than the other way around.

Although there is no particular specific test, the DOL seems to historically allow tip pooling for occupations which may not be on the list, but which, in practice, actually have more customer contact than that position traditionally has. Based on that, it would look like each restaurant almost has to be evaluated separately to see how tips are being allocated.

Getting tips wrong can cost the employer and the employee big hassles in taxes and other paperwork nightmares, and can simply drive restaurant staff to distraction. If you have any questions about how tips are handled in your place of employment, you would do well to contact an employment attorney.

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