Tip Pooling & Tip Stealing

It is a common practice in the restaurant and hospitality industry for employees who serve customers to pool and share their tips. In fact, employers can require, as a condition of employment, that employees whose work involves serving customers participate in a shared tip pool.The employer also has the right to determine how the tip money that is collected is divided among tip-eligible employees sharing in the tip pool.

Employers in New York have the right to pay their tipped workers less than the standard minimum wage, taking a “tip credit” toward the otherwise applicable minimum wage, provided that they comply with a number of legal requirements, including a requirement that they notify employees of their policy of applying a tip credit toward its minimum wage obligations. If an employer improperly gives itself a tip credit without providing the required notice and explanation to its employees, or without complying with other legal requirements, its payment of less than the standard minimum wage is illegal and its employees can recover underpaid wages, plus liquidated damages, from them.

The law limits which workers are permitted to participate in a tip pool. Only employees whose work is personally serving customers can receive a share of the tips that are collected. In a restaurant or similar foodservice setting, tip-eligible employees typically include servers, bus persons, runners, and bartenders. Other employees, such as hosts and hostesses or, depending on the circumstances, captains, may also be eligible to participate in a tip pool.

Because they do not provide direct customer service, kitchen staff, such as cooks and dishwashers, are not eligible to participate in a tip pool, and tipped employees cannot be required to share their tips with them. Nor may managers receive money from the tip pool, even if their duties include occasionally serving customers.

If an employer requires or allows ineligible employees, such as managers or kitchen workers, to share in pooled tip money, it loses the right to take a tip credit towards the minimum wage and is required to pay the full minimum wage to all of its employees, including traditionally tipped employees like waiters and waitresses, and can be held liable for the tips it stole, minimum wage under-payments and, in most cases, liquidated damages (which results in a doubling of the amount of underpaid or stolen wages owed).

If you work in New York in a tipped occupation and believe your employer is stealing your tips or forcing you to share tips with ineligible employees, you should speak to our experienced New York employment lawyers to discuss your legal rights and options.