Employers mandating tip pooling
Under the federal Fair Labor Standards Act, employers are permitted to utilize a limited amount of employees’ tips as a credit against their minimum wage obligations through a tip credit.
The decision applies to all businesses operating in the 9th Circuit, which includes the states of California, Nevada, Washington, Arizona, Oregon, Idaho, Montana, Hawaii, and Alaska.
When a hospitality business requires employees receiving tips to pool a portion of their tips together, this is known as mandatory tip pooling.
While “tipping out” occurs when tipped employees voluntarily contribute some of their tips to support staff, “tip pooling” is different as business owners require tipped employees to pool a portion of their tips.
Employers must provide tipped employees with the following information in order to use the tip credit: Notice of the above items may be provided either orally or in writing.
By Nick Beermann and Rochelle Nelson In a surprising decision that may require many restaurants and other hospitality businesses in the Western U. In most Western states, however, employers are not permitted to take tip credit (including California, Nevada, Washington, Oregon, Montana, and Alaska) pursuant to state law.
Under current federal law, if an employee earns .12 an hour in tips, it would be permissible for a restaurant to only pay the employee .13 an hour in cash wages in order to meet the .25 federal minimum wage.
While customary in most service environments, tipping, and more specifically, the dispersion of tips, is often not as black and white as your patrons would expect.
Between tip pooling and tip sharing, employee agreements often ensure that supporting staff receive their fair share of each tip earned in the establishment.