Your Tip Pool May Violate Federal Law

When you leave a tip for a waiter or a bartender, you probably assume that the money goes to that waiter or bartender.  But as a recent story from The Times Picayune shows, that’s not always the case.  Some restaurants require employees to participate in a “tip pool.”  In many cases the tip pool may actually violate federal law.   The article linked above discusses a recent case filed by bartenders at Dat Dog, who are represented by the Stiegler Law Firm and our co-counsel at the Chopin Law Firm.  That case alleges that an illegal tip pool led to underpaid wages for bartenders and other service employees at Dat Dog restaurants.

The Fair Labor Standards Act sets the minimum wage which, in most cases, is $7.25 an hour.  However, there is an exception for “tipped employees” such as waiters and bartenders.  Companies may pay tipped employees as little as $2.13 an hour, provided they make at least $7.25 an hour once their tips are taken into account.  If the employee does not make at least $5.12 an hour in tips, the employee is legally required to make up the difference — although many restaurants do not track this as carefully as they should.

Some restaurants take this a step further by imposing a tip pool – meaning that employees are required to “tip out” other workers who do not directly receive tips.  Tip pools are legal if the only employees who participate in the pool have regular interaction with customers.  Waiters, hostesses, and bartenders may all be required to participate in a tip pool.

Tip pools may not include back of house employees who do not have regular customer interaction. If a cook, dishwasher, or other back of the house employee participates in a tip pool, that pool is illegal under federal law.  The penalties for an illegal tip pool can be dramatic: employees may recover the difference between $2.13 an hour and $7.25 an hour for every hour worked, plus liquidated damages, plus the tips they were required to pay out.

If you have any questions about a tip pool, restaurant tipping practices in general, or if you think you have been underpaid wages or overtime, call New Orleans overtime lawyer Charles Stiegler at (504) 267-0777 or email me here.