A Compromised Reached: Tip Pooling

On March 23rd, Congress passed their Omnibus Spending Bill which included a few components that impact the restaurant industry, particularly an amendment which addresses the highly debated topic of sharing and equally distributing tips. Tip pooling, when the servers’ tips are shared with non-tipped employees such as dishwashers or kitchen staff, has been prohibited since a federal rule was passed in 2011. This regulation stated that all tips given by patrons are property of that employee, even if the employer claims a tip credit (a portion of the employee’s tips that are used to cover the employee’s minimum wage).

Most recently, last year the Department of Labor proposed a rule that would allow restaurants to establish tip sharing, also permitting employers from keeping some tip money for the organization, so long that each employee made at least the full Federal minimum wage of $7.25 per hour. This proposal resulted in heated backlash, with workers’ rights groups and advocates arguing that tip sharing would significantly lower the pay of those employees who depend on their tips for income.

After years of going back and forth and countless changes, the new amendment states that “an employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.’’ Additionally, the bill rescinds the parts of the regulations that prohibited employers from requiring their tipped employees to share their tips with non-tipped employees.

To sum up the results of the bill, a compromise was reached in which tip sharing among employees is permitted so long as the employer does not take a tip credit. This happy medium will hopefully help employers reach the goal of creating wage equity amongst all employees who all work as a team to provide wonderful customer service.