Tip Pooling

Minimum Wage Underpayment of Tipped Employees

Mandatory tip pooling occurs when hospitality businesses require tip-based hourly employees pool a portion of their tips together. Similar to tipping out (tipped wage employees voluntarily contributing some of their tips to support staff), tip pooling differs by business owners requiring tipped employees to contribute a portion of their tips to a pool. This pooled money is redistributed among tipped employees according to some pre-arranged system.

Tip pooling is not an illegal practice under federal or Tennessee law as long as it follows certain rules. Unfortunately, employers do not always follow these minimum wage requirements. If tip pooling has violated Tennessee minimum wage law over even a few weeks or if tip pooling has allowed an individual to systematically keep moneys due to you, you should contact our firm’s experienced TN wage and hour attorneys.

Tip Pooling and Minimum Wage

Tennessee follows the federal minimum wage standard. The base minimum wage for tipped employees is $2.13 an hour. Your employer must pay this amount if your average hourly tips for a shift exceed $5.12 an hour ($2.13 + $5.12 = $7.25, Tennessee’s current minimum wage).

If you receive less than $30 a month in tips, you cannot be considered you a tipped employee.

Your Tennessee employer is required to make sure you earn at least minimum wage. Some underpaid minimum wage cases involving tip pooling result from employees’ tips being redistributed so the tipped employee earns less than the hourly minimum wage. More often, tipping pool violations occur when an employer takes a portion of employees’ tips into a tip pool and redistributes it illegally.

Tip Pooling Wage Violations

Under the federal Fair Labor Standards Act (FLSA), which establishes federal minimum wage law, it is illegal for an employer to take tips from an employee. Tips are considered the employee’s sole property. Although it thereby seems it would be illegal, tip pooling is legal if it is “fair and reasonable” (less than 15% of a shift’s tips), redistribution is consistent, and the tip pool is distributed among commonly tipped employees.

Violations occur when an employer keeps a portion of the tip pool or if a non-tipped employee takes a portion. This may involve an owner or manager taking money from the tip pool. Other times, employees who do not customarily receive tips and should not qualify as tipped employees are paid a tipped employee’s wages and the difference made up by the tip pool’s redistribution. In other words, un-tipped workers are paid at the tipped employees’ expense.

The U.S. Wage and Hour Division has listed the following as employees qualifying as tip pool participants:

  • Wait-staff
  • Bellhops
  • Maîtres d’
  • Counter personnel serving customers
  • Bus employees
  • Service bartenders

The Wage and Hour Division suggests that dishwashers, cooks, janitors, and laundry-room attendants never qualify for tip-pooling arrangements, as well as managers or any individual (1) with the power to hire and fire, (2) supervises, plans schedules, or controls conditions of employment, (3) determines an employees’ pay, and (4) maintains employment records.

In addition, court decisions suggest that a tipping pool violates wage and hour law if this pool is not fully distributed.

Minimum Wage Recovery for Tipped Hourly TN Workers

Tennessee employers are liable for their tipped employees’ underpaid wages. They are also responsible for illegal pay practices if they violated rules governing employee tips. Violations of minimum wage law can extend back up to three years. Class actions are not uncommon with tip pool violations. Damages include back pay and attorney’s fees and may include punitive payments in especially egregious cases.

Contact our TN wage and hour attorneys, or call us at 615-353-0930.