Restaurant Employee Tips

A tip is money left by a restaurant customer for an employee above the amount owed. Employers do not own tips; they belong to employees.

What Is Tip Pooling?

In tip pooling, the tips given by customers are combined into one lump sum and then distributed to the employees.

Many restaurants have tip-pooling systems where servers tip out bartenders, bussers, hosts, and other restaurant employees. All bartenders or servers on the floor may be required to split tips equally.

These tip pooling systems may reduce your tip income, but they are generally legal so long as the tip pooling system is fair and only employees involved in the “chain of service” receive tips.

Employers are never allowed to receive tips, and in some states, managers and supervisors are prohibited from participating.

Who Has a Right to Share the Tip Pool?

Employees who provide direct service to patrons are eligible to participate in the tip pool. These employees include busboys, waitresses, bartenders, maitre d’s, and hosts. There may also be a tip pool for chefs who prepare food at the table.

Employees who act on behalf of the owner (i.e., who have hiring/firing or disciplinary authority) cannot participate in the tip pool. Managers and supervisors are included in this category. Additionally, employees who do not provide direct service cannot participate in the tip pool. Chefs, dishwashers, and line cooks are among these restaurant employees.

Can My Employer Force Me to Pool My Tips?

Under federal law, yes. However, the answer may still be “no,” depending on your state. Some states say involuntary tip pooling is illegal, and some say employers can make it mandatory should they choose, including Nevada and California.

What About Minimum Wage?

An employer of a tipped employee is only required to pay $2.13 per hour in wages if that amount combined with the tips received at least equals the federal minimum wage. Some cities and states require higher combined wage and tip totals for tipped employees than the federal government minimum wage. Employers must make up the difference between wages and tips if wages and tips do not equal minimum wage.

Are Service Charges Considered Tips?

A mandatory service charge is not considered a tip, and the employer must pay the full minimum wage and overtime required by law.

Am I Required to Pay Income Tax?

Income taxes generally apply to tips.

Both employees and employers have responsibilities:

• Employee: Report tip income monthly
• Employer: Collect taxes on tip income reported by the employee

What If My Tip Was Charged to a Credit Card?

When an employer pays a portion of each sale to the credit card company, the employee can receive a tip less than that portion. If the employer is awaiting reimbursement from the credit card company, tips charged to a credit card must be paid no later than the regular payday.

Are Mandatory Service Fees in Restaurants Considered Tips?

In some restaurants, service fees are mandatory for parties over six persons, and this service charge replaces any tips given by patrons. Therefore, it would count toward the employee’s tip.

Tip Deductions

Other reasons may cause your restaurant employer to dock your pay or seize a portion of your tips, including:

• A table that fails to pay
• Server food order mistakes
• A cash register shortage

The pay-docking may seem unfair, but depending on your state, it may be allowed as long as it does not deplete your income below minimum wage.

However, it is illegal in other states, such as California, unless the employer can prove that the employee acted dishonestly, willfully, or negligently. While pay-docking in these situations may be illegal, employers can still discipline employees for mistakes.

Tip Payment

A restaurant server receiving tips on a customer’s credit card must be paid in full by the next payday. Employers may, however, be permitted to decrease credit card tip amounts by the percentage the credit card company charges.

Tip Credits and Minimum Wage

As long as you are earning at least minimum wage with tips, your employer may be allowed to pay you less than minimum wage. It is called a “tip credit” because the tips you earn are credited toward your overall salary.

• Tip Credit States: States that allow tip credits still have separate lesser minimum wages that employers must pay to tipped employees. For example, the minimum wage in Illinois is currently $12, but the minimum wage for tipped employees is only $7.20. Employers still owe restaurant servers an hourly wage even in tip credit states.
• Non-Tip Credit States: However, in other states, like California, employers must pay servers the regular minimum wage regardless of how much the server earns in tips. You can check the minimum wage tipped employees are owed in each state on the U.S. Department of Labor website.
• Remedies: If your hourly wage combined with your tips is still less than your state’s minimum wage, then your employer must compensate you for the difference. You may be entitled to back pay if your employer fails to pay you the minimum wage required by your state.

Other Types of Restaurant Law

• Insurance: Some possible types of insurance you may need are property insurance, liability insurance, liquor liability insurance, or workers’ compensation insurance
• Real Estate Law: Whether leasing or building facilities, zoning and other regulations may be applicable
• Business: Some business-related legal issues include business formation, tax implications, franchising
• Employment Law: Any time there are employees of a business employment law issues may arise
• Intellectual Property: Some intellectual property issues include registering the name of a restaurant as a trademark, registering for a recipe patent or trademark for food creations, and licensing music to play in the restaurant.

What Should I Do if a Restaurant Is Negligent?

To successfully sue a restaurant for negligence and recover for your injuries, you must prove that the restaurant’s negligence caused your injuries and illness and that the negligence was the direct cause.

Therefore, you must provide evidence that the act or omission of the restaurant that caused your injury was foreseeable by the restaurant owner, that the actions were negligent, that the actions directly caused your injuries, and that your damages are measurable (like hospital bills).

The restaurant will be responsible for your damages if you prove they were negligent. Depending on the circumstances, you may be entitled to compensation for medical bills, lost wages, pain and suffering, and other out-of-pocket expenses.

For a successful claim against the restaurant, gathering as much evidence as possible, especially evidence linking the restaurant’s acts or omissions to your injuries, is essential. It is always a good idea to obtain any incident reports due to your injury.

Restaurants must fill out an incident report documenting the details of the incident and witnesses. For example, a slip and fall incident would require obtaining the incident report and witness statements indicating that the hazard had been present for a while but had not been addressed.

What Should I Do if I Need a Lawyer?

Without expert legal advice, knowing if your rights have been violated can be difficult due to jurisdictional differences between states. If you are concerned that your employer is violating your rights, please contact an employment lawyer.