Tip Sharing & Pooling
Tip pooling rules changed significantly under the 2018 FLSA amendments. Understanding who can participate — and who cannot — protects your business from costly wage claims.
Yes. Under the FLSA, employers who do not take a tip credit may include back-of-house employees — cooks, dishwashers — in a mandatory tip pool. Employers and managers are never permitted to participate regardless of tip credit status.
No. Federal law prohibits managers and supervisors from receiving tips from a pool under any circumstances — even if they occasionally perform tipped work. Violations carry back-pay liability plus penalties.
A tip credit allows you to pay tipped employees below the federal minimum wage (as low as $2.13/hour), provided their tips bring total hourly earnings to at least the federal minimum. If tips fall short, you must make up the difference.
You must track tip amounts received, pool contributions, and distributions to each employee. These records protect you in a Department of Labor investigation and are required for accurate W-2 reporting at year end.
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