Restaurant tip pooling rules

What about Tip Pooling?
By definition tip pooling is simple: all tip earnings of the service employees are intermingled and then redistributed.  By application it is a more complicated process.   Briefly, here are some of the ground rules: to be acceptable under law, a tip pool “must be completely voluntary, initiated by the employees themselves with or without the knowledge of management, and not made part of the terms of hire or conditions of continuing employment.”  This means that an employer may not be involved in a tip pool - other than that of a “ministerial” or administrative function of “distributing tips charged on credit cards according to a formula devised solely by the affected employees.”  I can hear the questions now.  No, a restaurant owner cannot determine whether or not he wants to be a “pooled house” - it is up to the employees only.

The DOL has  advised restaurant owners that if employees having decided to pool tips, and further agreed that the employer should play a part in the collection and/or distribution of the pooled tips, the DOL has found it reasonable for the owner - if it chose to participate - to demand that the terms of the tip pool agreement be reduced to writing.  The employees should put the terms of the pool in writing and give it to the owner with a list of participating employees.  If the employees refuse to put it in writing, the employer could refuse to participate in the collection/distribution. This is an essential defense for employers and should be implemented where tip pools are in place.

Complications certainly arise with tip pooling, and employers need to be aware of some ways they can become ensnared.  First, neither management nor the employees can make new hires participate in the tip pool.  Any employee can opt-out at any time - certainly an administrative nightmare - however, there are exceptions in rare occasions, including service teams, which will not be addressed in this column.  Second, when employees initially consent to the formation and implementation of a tip-pool, 100% of the wait staff do not need to consent -any one can opt-out and keep his/her own tips subject to any tip sharing that the employer may require.