Photo by Petr Sevcovic on Unsplash
If you’re a restaurant owner, you should be aware that under the Fair Labor Standards Act (FLSA), it is illegal to share servers’ tips with managers or use servers’ tips to pay other employees’ wages. This may seem like common sense, but as recent developments have highlighted, many restaurants are still mishandling employee tips – and it’s costing them dearly.
Restaurant owners, it’s essential to be aware of the rules surrounding tips to avoid costly violations. Here’s what you need to know:
1. You Can’t Require Employees to Share Their Tips
Under the FLSA, employees have the right to keep their tips. This means that you cannot require employees to share their tips with managers or other employees. You also cannot take a portion of a team member’s tips for yourself or the restaurant. And tips are not counted as part of their federal minimum wage. To do so risks a violation of Federal law.
2. You Can’t Use Tips to Pay Wages
Tips are considered the property of the team member who earns them. Therefore, you cannot use tips to pay a team member’s wages. You also cannot require employees to pool their tips and then use those tips to cover the cost of business expenses, such as credit card fees or upkeep for restaurant equipment.
3. You Can’t Keep Tips Left for Managers
If a customer leaves a tip for a manager, that tip belongs to the manager. You cannot keep that tip or require the manager to share it with other employees. When a manager gets a tip, this is good for the restaurant business because it means they’re doing such a great job that a customer wants to go above and beyond to make it known.
4. You Can’t Require Employees to Tip Out
You also cannot require employees to “tip out” a certain amount to other employees, such as cooks or busboys. However, you can require employees to tip out to other employees who provide direct table services, such as bartenders and servers.
5. You Can’t Make Employees Pay for Walkouts
If a customer leaves without paying their bill, you cannot deduct the cost of that bill from their hourly wage or their tips. You also cannot require employees to pay a “tip out” to cover the cost of a walkout.
6. You Can’t Make Employees Pay for Breakages
If a team member breaks something, you cannot deduct the cost of that item from their wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of breakages.
7. You Can’t Make Employees Pay for Cash Drawer Shortages
If a team member’s cash drawer is short at the end of their shift, you cannot deduct the shortage amount from their wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of a cash drawer shortage.
8. You Can’t Make Employees Pay for Walk-Ins
If a team member allows a “walk-in” (someone who is not a regular customer) to be seated at their table, you cannot deduct the cost of that walk-in customer’s meal from their wages or their tips. You also cannot require employees to pay a “tip out” to cover the cost of walk-ins.
9. You Can’t Make Employees Pay for Spills
If a team member spills food or drinks on a customer, you cannot deduct the cost of that spill from their wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of spills.
10. You Can’t Make Employees Pay for Customer Complaints
If a customer complains about their service, you cannot deduct the cost of that complaint from a team member’s wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of customer complaints.
11. You Can’t Make Employees Pay for Promotions
If a team member agrees to participate in a promotion, such as a “two-for-one” special, you cannot deduct the cost of that promotion from their wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of promotions.
12. You Can’t Make Employees Pay for Slow Nights
If business is slow and a team member doesn’t earn as much in tips, you cannot deduct the difference from their wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of slow nights.
13. You Can’t Require Employees to Share Tips with Non-Tipped Employees
You cannot require employees to create a tip pool to share their tips with non-tipped employees, such as cooks or dishwashers. However, you can allow employees to voluntarily create a tip pool for their collective tips and then distribute those tips to non-tipped employees.
14. You Can’t Make Employees Pay for Breakages
If a team member breaks something, you cannot deduct the cost of that item from their wages or tips. You also cannot require employees to pay a “tip out” to cover the cost of breakages.
Bottom Line
While employers are allowed to collect tips and distribute them among employees, there are many things they cannot do with those tips. This is only fair, as employees should not have to pay for things beyond their control, like customer complaints or slow nights.
If you are an employer, make sure you are aware of these regulations, as violating them could result in penalties. And if you are an employee, know your rights so that you can be sure you are being treated fairly.