Always wait at least one hour before swimming after a large meal. That big brown shark in the swimming pool isn’t always a Baby Ruth. Hold the cue stick properly. Chalk up before each shot. These are solid (and mildly off-putting) pool tips.
But let’s talk about tip pools instead.
What is a tip pool?
A tip pool is where “tipped employees” combine some or all of their tips and redistribute them amongst themselves (and maybe others too) at the end of a work shift or other determined timeframe. A tipped employee is any worker (full-time, part-time, or temporary) engaged in an occupation where they customarily and regularly receive more than $30 per month in tips.
Can tipped employees pool their tips with non-tipped employees?
Yes, provided that — and this is very important — no tips get pooled with managers or supervisors, and employers pay the tipped employees the full minimum wage ($7.25/hr under the Fair Labor Standards Act) and do not take a “tip credit” from tipped employees. Otherwise, the tip pool will violate the FLSA.
Employers that take a tip credit under the FLSA may require a tip pool composed of only those employees in occupations that customarily and regularly receive tips (for example, servers and bussers).
What is tip credit?
If the employer pays a cash wage of $2.13 per hour and has provided notice to a tipped employee, the FLSA permits an employer to claim a tip credit of $5.12 per hour ($7.25 – $2.13 = $5.12). It must ensure that employees receive at least minimum wage. Otherwise, the employer must make up the difference.
The employer may only take a tip credit for tips each employee receives. The employer can never keep tips.
Check out Jon Hyman’s post for a more detailed explanation of tip credits.
Must the employer notify employees of a tip pool?
Yes. An employer must notify its employees of any required tip pool contribution amount.
How does this relate to a bartender who gained some COVID-19 weight?
First, if you missed yesterday’s post, I’ll wait a few minutes while you read it.
Besides asserting a claim of sex discrimination against her former employer, the plaintiff also alleged that the defendant operated an illegal tip pool. Allegedly it took a trip credit from the plaintiff while requiring her to pool tips with non-tipped workers such as house cooks. If true, that would violate the FLSA, and the defendant will owe her back wages and liquidated damages. Theoretically, the defendant forced additional tipped employees (i.e., plaintiffs) to participate in this seemingly illegal tip pool. So, the damages could multiply.
If you are thinking about starting a tip pool, there are many legal considerations under federal and state law, which do not always overlap. Before diving into the deep end, consult a lawyer first.
Otherwise, that Baby Ruth will be the least of your troubles.