The area of tip pool litigation is one that has gained a lot of attention over the last few years as restaurant employees learn how they are supposed to be properly paid under the Fair Labor Standards Act (“FLSA”). First, federal regulations allow restaurants to pay their tipped employees as little as $2.13 per hour plus tips as long they make enough tips so that their hourly wage is at least minimum wage ($7.25). In other words, if you add up the $2.13 per hour for the week plus the amount of tips received for the week and divide it by the total number of hours worked, you will find an hourly rate. This hourly rate must be at least minimum wage. Also, the FLSA requires that for all hours over 40 in a workweek, the hourly rate must be at least minimum wage and a half.
Second, federal regulations allow restaurants to require their wait staff and other tipped employee to participate in a “tip pool.” However, only certain types of employees may participate in the tip pool. The FLSA says say that the employees in the tip pool must be employees who “customarily and regularly receive tips.” This means only employees like servers, waiters, bartenders, barbacks, food runners, and host/hostesses may receive money from the tip pool. Tipped employees may not be required to share their tips with employees who do not customarily and regularly receive tips.
Sometimes employers will illegally include other employees in tip pools to help cover that employees’ hourly wage. For example, a restaurant violates the FLSA if it collects tips from the servers and bartenders and then distributes some of the tips to kitchen workers. Sometimes restaurants even collect tips from servers and bartenders and then deduct a portion of the tips to cover overhead expenses like uniforms, broken glasses, etc. This also violates the FLSA tip pool laws. ALL of the tips collected in the tip pool must be given to the tipped employees and cannot be used to cover restaurant expenses.
If a restaurant violates the FLSA tip pool rules, it could end up owing its employees the difference between $2.13 (which was paid) and minimum wage for every hour the employee worked. Employees may also be able to recover liquidated damages which are essentially double damages – courts will double the amount of an employee’s owed wages.