Understanding DOL Tip Pooling Laws for Restaurants and Bars

The U.S. Department of Labor (DOL) has specific regulations regarding tip pooling and tip sharing in the restaurant and bar industry. These rules are designed to ensure that tipped employees are compensated fairly. As a manager or owner, staying compliant is not just good practice—it's the law.

Key Provisions of the Fair Labor Standards Act (FLSA)

The FLSA is the primary federal law governing wage and hour standards. Here are the most critical points for tip pooling:

• Mandatory vs. Voluntary Pools: Employers can mandate a tip pooling arrangement between employees who "customarily and regularly" receive tips, such as servers, bartenders, and bussers.
• Inclusion of Back-of-House (BOH) Staff: A significant recent change allows employers who do not take a tip credit to include non-tipped employees, such as cooks and dishwashers, in the tip pool. If an employer takes a tip credit (paying a sub-minimum wage with the expectation that tips will make up the difference), the pool can only include traditional front-of-house (FOH) tipped employees.
• Managers and Supervisors Are Excluded: The law is explicit: managers, supervisors, and employers are not allowed to keep any portion of employee tips, regardless of whether a tip credit is taken. This includes participating in a tip pool.
• Credit Card Fees: Employers can subtract a proportional amount from an employee's tips to cover credit card processing fees. For example, if a credit card company charges a 3% fee, the employer can deduct 3% from the tip amount before distributing it.

What This Means for Managers

Your responsibility is to design and implement a tip pooling system that is both fair and compliant. Here are some action items:

1. Define Your Pool: Clearly document which positions are included in your tip pool. Ensure your policy aligns with the FLSA rules based on whether you take a tip credit.
2. Communicate Clearly: Your tip distribution policy should be written down and easily accessible to all employees. Transparency is key to preventing disputes.
3. Keep Accurate Records: Meticulous record-keeping of tips received and distributed is your best defense in an audit or dispute. Tools like TipOut Buddy can help automate and simplify this process.
4. Stay Updated: Labor laws can change. Regularly check the DOL website or consult with legal counsel to ensure your policies remain compliant.

For more detailed information, you can always refer to the official Department of Labor resources.

Visit the DOL's Tip Regulations Page →

Disclaimer: This article provides general information and is not legal advice. Consult with a legal professional to ensure compliance with federal, state, and local labor laws.