When you work in a service industry where tips are expected, such as in a restaurant, a salon, a dance club, or other job where you are directly tipped, these funds often account for the majority of your earnings. Tips are considered part of an employee’s base pay, therefore the federal minimum wage for tipped staff is often lower than the average.
In restaurants and other service establishments, tip pooling or sharing can help make sure that all employees are adequately paid for their efforts serving the customer at different points during their experience with the business.
That said, tip sharing and pooling are not always done appropriately, and some tactics not only deprive workers of the money they rightfully earned, but they are also unlawful. You could be a victim of wage theft without ever realizing it. Here’s what you should know.
Tip Pooling vs. Tip Sharing Under Labor and Employment Law
If you suspect your employer’s tip sharing or pooling policies are illegal, gaining a better understanding of New Hampshire and Massachusetts labor laws and how they may impact you is a critical first step.
Definition of a “Tip”
A tip, sometimes known as a gratuity, is money paid to staff member by a client or customer of a business, additional to how much the service rendered cost. To understand the legality of tip pooling and sharing, it’s necessary to first know what constitutes a “tip.” If money paid to an employee by a customer is a tip, it is only the employee’s money, not the employer’s. Service charges are generally not considered tips.
Tip pooling is the process of collecting cash, check, or credit card tips received from customers by tipped employees and putting them into a single “pot” or “pool.” The total is then divided equally between all employees. Tip pooling guarantees that all staff members are adequately paid for their labor, especially when different services are provided by multiple staff members and only one point of payment is available.
For example, at a nail salon, two or three employees may work on one customer’s nail services. The customer, however, is only able to leave a single tip and cannot designate how much goes to whom. With tip pooling, all the employees who attended to the customer would get an equal share of their tip.
Tip Sharing or “Tipping Out”
Tipping out, often referred to as tip sharing, is not the same as tip pooling. If an employer’s policy requires tipping out, a tipped staff member will share a portion of their total tips to other employees who aren’t tipped.
For example, in a restaurant, waitstaff may be expected to tip the dishwasher or the chef. Adult entertainment venues typically use tip sharing as a standard, and dancers are generally expected to tip the DJ, security, bartenders, etc.
Federal Tip Pooling Laws
Generally, most scenarios of tip pooling or sharing are perfectly legal setups that abide by all federal labor laws and regulations. However, one critical thing to note is that tip sharing or pooling should not include “the house,” managers, supervisors, or owners. If management includes themselves as an equal employee to be tipped from the pool, they are most likely doing so illegally.
What Employer Actions Are Against Tip Sharing Laws?
The simplest litmus test to determine if tip sharing or pooling is against the law is if tips go to employees or employers. If tips are going to anyone but staff, this is considered against the law.
The following are some examples of wage theft in tip pooling and sharing scenarios:
- Service charges are counted as tips by the employer
- Employers hold credit card tips until the next payday while the business waits for payment from the card companies
- Employers implementing wage deductions or penalties that put an employee’s pay below the minimum wage at any point during their shift
- Employers deducting a higher tip credit when overtime hours are worked
- On slow shifts, employers do not make up the difference to ensure employees are paid at least minimum wage for all hours worked
- Being refused compensation or payment for overtime hours worked
How a Labor Lawyer Can Help You
If you believe you’ve been the victim of wage theft, it’s important to reach out to an experienced consumer protection attorney as soon as possible. You need to arm yourself with more information about labor and employment law, tip pooling laws, and other labor regulations related to your circumstances.
Doing so on your own can be challenging; you may not know where to look or how to get the right information that pertains to your unique situation. This is where a wage and hour attorney can be a valuable asset. A labor law attorney can review your case and determine the next best step to obtain the wages you’re owed.
When you work with an unpaid wages lawyer, you increase the chances of being successful at holding your employer accountable for wage theft and being compensated not only for the money stolen from you but also for your inconvenience and any damages you suffered as a result.
Contact Mazow | McCullough, PC Today for More Information
If you’re a victim of wage theft or your employer is unfairly distributing the tip pool, don’t hesitate to contact a competent wage and hour attorney in Massachusetts or New Hampshire to help you. Contact Mazow | McCullough today for your consultation at (978) 744-8000 or toll free at (855) 693-9084.