Key Issue: Tip Pooling
ORLA in the News with U.S. Department of Labor Final Rule on Tip Pooling
A final rule on tip pooling in the United States was recently released on December 22, 2020 and will go into effect across the country on February 20, 2021. The final rule further establishes the legality of overseeing and managing a tip pool that includes staff who do not customarily and regularly receive tips by directly interfacing with a customer. Managers and supervisors are still prohibited from participating in tip pools. The final rule does define further, explaining as follows:
“...the final rule defines a manager or supervisor for purposes of section 3(m)(2)(B) as any employee (1) whose primary duty is managing the enterprise or a customarily recognized department or subdivision of the enterprise; (2) who customarily and regularly directs the work of at least two or more other full-time employees or their equivalent; and (3) who has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing are given particular weight. The definition also includes as managers or supervisors any individuals who own at least a bona fide 20 percent equity interest in the enterprise in which they are employed and who are actively engaged in its management.”
In summary, the final rule simply codifies our collective win advocating for the importance of tip pools. Pages 11 and 12 of the Rule states:
“In 2016, a divided Ninth Circuit panel upheld the validity of the 2011 regulations. See Oregon Rest. & Lodging Ass’n (ORLA) v. Perez, 816 F.3d 1080, 1090 (9th Cir. 2016). Although the Ninth Circuit declined en banc review of the decision, ten judges dissented on the ground that the FLSA authorized the Department to address tip pooling and tip retention only when an employer takes a tip credit. The dissent noted that the Ninth Circuit itself had decided in Cumbie that the FLSA ‘clearly and unambiguously permits employers who forgo a tip credit to arrange their tip-pooling affairs however they see fit.’ … In its 2018 response to the petition for a writ of certiorari in the ORLA case, the government explained that the Department had reconsidered its defense of the 2011 regulations in light of the Ninth Circuit’s ten-judge dissent from denial of rehearing in ORLA and the Tenth Circuit’s decision in Marlow … the Department published in December 2017 an NPRM that proposed to rescind the challenged portions of the regulations.”
The actual regulation and a summary of the final rule can be found here: https://www.dol.gov/agencies/whd/flsa/tips.
Restaurant Employee Compensation Tools
With tip pooling being legal with back of the house employees, employers may have questions about what their options are. ORLA launched a Restaurant Compensation Solutions Workgroup to review tools being implemented in restaurant operations across the state, including mandatory service charges, tip pooling policies based on sales that assist in compensating kitchen staff, and dual tip lines notating tip options for both servers and kitchen staff.
Tip pooling policies should be carefully reviewed with counsel before implementation to ensure compliance with all applicable requirements. For more on this subject, click the links below.
Update: December 2019
A federal spending bill passed in 2018 abolished a 2011 regulation prohibiting tip pooling; managers can now require that servers share tips with kitchen staff in states where employers do not take a tip credit. This change allows tip sharing among both customarily and non-customarily tipped employees in Oregon, including dishwashers and cooks. Managers, supervisors, and owners cannot participate in the tip sharing. A proposed rule to implement the change has been released as of October 7, 2019; comments were due by December 9, 2019.
One thing this proposed rule seeks to address is that the words “supervisor” and “manager” were not defined in the 2018 spending bill. This is especially important to our industry since many have hybrid approaches to their service positions. Supervisors and managers in some of Oregon’s smallest restaurant operations commonly serve guests and have participated in front-of-the-house tip pools as a part of a team approach to foodservice.
Employers are to use the “duties test” to determine who qualifies as a supervisor or manager, and establish tip pool eligibility. Essentially, if an employee’s primary or regular duty is not management or supervising, they are still allowed to participate in a tip pool. For details on the standard of the “duties test,” read the U.S. Department of Labor (DOL) Field Assistance Bulletin.
Prior to this change, the decision to participate in a tip pool was left to employees. For more context on the issue, check out Tipping the Scales (Oregon Business, April 2018). The Bureau of Labor and Industries (BOLI) FAQ may answer any additional questions regarding tips at Oregon.gov/BOLI.
For additional questions, contact Greg Astley, Director of Government Affairs, at 503.682.4422.
This is for general informational purposes only. The information is not, and should not be relied upon or regarded as, legal advice. Please consult with your legal advisors.
8/28/2017 01:06:58 pm
If restaurants can circumvent the 9th Circuit ruling via a kitchen tip line, why can't we just change the tip line to read "tip pool" or "shared staff gratuity" or something that indicates up front that the tip will be shared with all staff? Isn't the issue at hand that the customer believes the tip is going only to the server? If they are told that it is shared right there on the check, what is the problem?
10/31/2017 05:52:56 am
Back in the late 1960s and early 1970s when I was growing up my mom always had two tips. One for the serving staff, waiter or waitress, and one for the busboy. I still try to get that done today if there is separate busboy service. Tipping the cooks? They were supposed to be properly paid benefits and wages.
10/31/2017 09:04:37 am
Voluntarily tip sharing is certainly something many industry members embrace and that practice is entirely legal as long as wait staff are making those decisions to share tips entirely on their own without involvement from shift supervisors, managers, or owners.
3/26/2018 07:50:28 pm
As a cook, overnight i lost thousands of dollars and in my experience only 1 out of 100 servers tip the back of the house on thier own free will
1/13/2021 07:45:16 pm
Rarely are the kitchen staff comprnsated for the amoint of work they do, they work unpleasant hours split shifts, random days off, get called in at moments notice. Ofen the cooks are paid minimuim eage or barely slightly better. Many work split shifts to save the owners $$$ less than full time hours or come in for services the sent home and called bsck latter when it gets busy. The ones tbat say do it out of passion for cooking. I hated putting my heart and soul in to a meal hear the wait staff saying how much the custimer loved the neal and latter finding out they got a large tip and couldnt even give the cook enough to grab a beer after work. Or all thr specials the we are asked for in the middle of a rush. We are expected to work them in and nothing.
10/31/2017 09:04:09 am
The reality is law firms disagree about whether language can simply be added to receipts in full service restaurants that provides an opportunity for employers to implement a tip pooling policy with back of the house workers. The 9th Circuit ruling states that tip pools are only legal when they are shared amongst employees who are ‘regularly and customarily’ tipped. Kitchen staff who do not have the opportunity to interact with customers are most likely not included in the 9th circuit’s interpretation. The ruling is murky as it applies to counter service operations where customers pay at the counter and are presented with an opportunity to tip when ordering their food from that counter. Lawyers again are split but many believe a tip jar on the counter and language on the receipt at the counter stating that tips are shared amongst all employees is legal as a part of counter service model operations. We look forward to receiving more clarity from the United States Department of Labor and hopefully the United States Supreme Court in the coming year.
11/2/2017 07:29:56 pm
I've asked many of our customers if they believe their tip is split between server and BOH, the majority already believe that sharing is going on. They tip for the food too.
4/17/2018 10:31:53 am
Very good idea
2/7/2019 12:50:58 pm
The bigger issue is, tip tax is being used to subsidize the establishment, using the tip income to off set wages is unconstitutional ! Tip are given as a gratuity for exceptional service and are normally shared at the rate of 10% with bus and dishwashers. Inspit of some pathetic politicians claim to fame, the loss of millions of dollars in lost income to one of the worlds oldest and most abused professions is appalling !
12/6/2017 07:29:43 am
I am a customer. I tip the wait staff to encourage good service. The waitstaff can in turn share their tips with the BOH who provide them with good service. If, for example, the buss'er is slow it obstructs good service, so they deserve nothing from the waiter. This has been a world custom for eons. Forcing the waitstaff to share with snarerling cooks & other slackers sounds like comunisium to me.
1/4/2020 03:51:56 pm
I am a cook and I can assure you that no one in the back of the house (except for a few individuals) is slacking off. Cooking is very physically demanding work as well as mentally challenging, there are all kinds of things we do that a customer has no understanding of. It's not like cooking dinner for yourself or even a dinner party. It is a high-stress, fast-paced job that requires use of many tools that are very dangerous and we get hurt all the time, whether burns, cuts, muscle strains, repetitive stress while we are on our feet all day long, and when we're not cooking for the customers presently there, we are prepping, stocking, and cleaning (half the job is cleaning!) while maintaining food safety standards. We might not smile at a customer because that's not our job, nor should it be, people work in front or back of the house based on their qualifications and we all work together so that customers have quality food that is safe to eat and a comfortable and clean atmosphere. Whether or not you see us or think that we're somehow lazy (and even though we are legally entitled to breaks, we very often don't actually get them) we are all part of making things work and our efforts should be respected rather than be maligned as "snarerling" (not a word btw) or "lazy" or laughably, "communist".
1/13/2021 07:51:48 pm
6/22/2020 10:19:41 am
Lol, for a second there it looked like you called cooks slackers
1/13/2021 07:51:33 pm
He did grrfff
1/13/2021 07:49:28 pm
I tale offence at your implacation that the BOH is works less hard then the front, im most cases its the reverse.
12/6/2017 07:44:34 am
I am a tipped employee. My great tips come mostly from "regulars" that I have cultivated over the years of my employment. The back of the house had nothing to do with what goes into being a great bartender. Not only do I make drinks, serve food, talk, listen, fix problems but I wash every glass in the restaurant, clean, stock and make drinks for every restaurant guest. If employers do not make enough money to pay back of the house a decent wage without stealing my hard earned tips then they should not be in business or maybe should work themselves and not depend on someone else to make them as much money as they feel they need. If tips start to be distributed to all employees, not just the busser and the hostess, service will cease to exist because there will be no incentive for the server or bartender to go above and beyond. Taking tips from employees, pooling and giving them to other workers is wrong and still illegal. Let's keep it this way. If you have never worked in the service industry you really do not understand enough to comment or make a new law.
12/8/2017 04:47:13 pm
We believe in the rights of workers and employers to establish workplace policies without the need for over regulation from government. The law would simply allow employers to do what works best for their organization, it’s not about forcing a tip sharing model.
4/24/2018 04:44:11 pm
Bartenders should go "above and beyond" because they work for the establishment and that is also their job.
12/8/2017 10:44:51 pm
I’m a server, I’ve also been a bartender for years.
1/10/2018 07:09:41 am
I am a Server, This whole case wreaks of political BS.
1/10/2018 02:11:48 pm
Employers who attempt to take a portion of tips for any purpose other than wages for hourly staff involved would be dangerously foolish.
1/12/2021 03:38:21 pm
As I am reading this, you think that the kitchen shouldn't get tips? Back in the day (at least on the east coast) 90% of the servers shared tips with busboys and kitchen staff. But now, with corona virus, most people are tipping FOR THE ESTABLISHMENT to continue to exist. Does that mean if a customer tips $20 on a $10 check, that $20 should go to the cashier (the counter person - not a sit down restaurant)?
1/13/2021 03:47:40 pm
Lorigay Laskin - in response to your reply on 1/12/2021 03:38:21 PM, ORLA has been advocating to allow restaurants to implement tip pooling so they can legally share tips with kitchen staff. DOL’s final rule (Dec. 2020) affirms the legality of a tip pool that includes BOH staff. However, managers and supervisors are still prohibited in participating in these tip pools. The one exception to this rule is “a manager or supervisor may keep tips that he or she receives directly from customers based on the service that he or she directly provides.” Read the actual regulation and a summary of the final rule here: https://www.dol.gov/agencies/whd/flsa/tips.
1/9/2018 04:12:02 pm
Having owned a restaurant, I don't mind FOH making more than BOH, but it's insane when they are grossing $32/hr and cooks are making 18. Sure, it's easy to say "if you can't afford to pay your staff, you don't belong in business," but there is a country-wide labor crisis in the kitchen pointing out what's been unfair for ages—the kitchen gets crap pay throughout the industry. It's sad but necessary to allow for some sane, legal tip share—yes, created by ownership, and agreed to by staff—to make sure restaurants are economically viable. Otherwise, raise prices across the board. Maybe it works in towns where there's no difference paying $240 for dinner vs. 180 (seattle etc.) but across the wide swaths of u.s.a. it will be the death of, at least, independent fine dining restaurants.
1/9/2018 04:19:49 pm
Thank you for sharing your input as a former restaurant owner. We encourage you to share your opinion with the DOL if you haven't already. Here's a direct link to easily comment on the proposal: http://p2a.co/Kl7IGf7
2/3/2018 03:00:48 pm
People make the mistake of thinking that all a server does is deliver food. Some do and don't know any better. But the people who are making a decent living in the industry are top notch sales and customer service people. Their incentive is the size of the tip by raising the size of the check. Take that incentive away and what motivation do they have to push a restaurant's product? They don't and they won't. Besides, would you propose taking away a salesman's commission. No you wouldn't. That's what a good server's tips are to him/her.
4/17/2018 10:41:29 am
1/10/2018 08:37:34 am
If Restaurant owners continue this battle they are sinking their own ship.
2/3/2018 03:07:54 pm
I agree 100%. The last job I had before my present job the owner robbed me out of 3 weeks salary. They had no money to pay their staff after they shut down unexpectedly, but they had money to take a whirlwind 3 month long European vacation. The Labor Department told us we can expect a long, drawn out fight to get our back salary with no guarantee that we'll get it even after jumping through all the hoops.
1/21/2018 11:34:50 am
Simple fix, hire less servers during the week and have the BOH help serve food. One server takes orders everyone serves and now everyone is a "regurually" tipped employee making a tip pool 100% legal. Then on the weekendeds BOH doesnt server but since they are regularly tipped employees pooling is legal. Phh easy I should get a medal or something. Ty ty
2/3/2018 03:11:28 pm
This short sighted legislation is going to cost the state governments and the federal government billions of dollars in lost tax revenue. Right now servers pay taxes on both their salary and tips. If they are only receiving a salary and no longer paying tax on tips, that is going to cause a loss in tax revenue to the government. For example, if a server makes $600.00 a week in pay and tips, and then is just given a salary at minimum wage instead (a potential 50% decrease or more) how is paying taxes on just $300.00 a week going to bring in more taxes than if the server paid taxes on $600.00 a week? It's not, and the DOL says nothing about how the taxes for the tips are going to be collected from restaurant owners who take the tips from their servers. I suspect the restaurant owners will just bundle those tips in with their business, using them to make payroll, renovations, or their own personal expenses, and then take tax write-offs for business expenses, which will negate any taxes that should be received by the government for those tips. I wish the DOL would address this very important issue.
3/27/2018 02:27:34 pm
The employer does not keep the tips, They are distributed to all of the staff who worked to earn them. Oregon does not have a server wage or tip credit. The taxes the server is not paying on income no longer being taken from the rest of the staff, will be paid by other employees whom earned that income.
4/26/2018 05:06:51 pm
Thieves nothing but thieves the whole lot of them.
5/12/2018 03:18:45 am
I am agreed with you. They had no money to pay their staff after they shut down unexpectedly. The employer does not keep the tips, They are distributed to all of the staff who worked to earn them. Oregon does not have a server wage or tip credit. We can all stand in the unemployment line together as equals.
4/11/2019 10:22:41 am
I own a sandwich shop and all my employees, supervisors and managers help customers, prepare food and wash dishes. A recent computer update has allowed me the option of collecting credit card tips. My lawyer advised against pooling them even though my managers many times work alone at times of the day. BOLI also is very vague when I asked them directly and they referred me here. I want to add this option and I have no problem with the additional work I would be required to do. I am debating on deducting the credit card fees of 2.5%. Having a QSR is different than and I am not finding a lot of help on this front. Any suggestions or comments ?
4/11/2019 12:09:17 pm
Stacey, good question and not easy to answer. We are happy to chat about this, could you direct message ORLA at firstname.lastname@example.org with your phone number? Thank you.
4/11/2019 01:34:44 pm
6/6/2019 01:59:13 pm
Is it currently legal in the state of Oregon for a restaurant owner to deduct a percentage of an employees charged tips as a credit card surcharge? I have found conflicting information and am hoping for a straightforward answer. Thanks.
Oregon Restaurant & Lodging Association
6/7/2019 03:04:56 pm
Brittany, concerning the ability of restaurants to deduct for credit card fees based on a fixed average amount: The U.S. Department Labor guidance says that restaurants can deduct a standard composite amount for tip transactions as long as in the aggregate, it doesn’t dip them below the charges associated with credit card fees and such. Here is a link: https://www.dol.gov/whd/opinion/FLSA/2006/2006_01_13_01_FLSA.htm
7/12/2019 09:35:19 am
I am a driver for a pizza place. I have never been forced to pool tips before and would love some clarification. I am required to submit all tips and they are divided by the owner once a month by "time worked" this is BOH inclusive and we are not shown if the amounts are true or if the owner is splitting them with herself as well. Is this lawful to have a more than less than transparent tip pooling of this nature? It is one thing if they were divided every night in front of us but they are collected and then paid out once a month. I have never heard of this type of pooling. Any clarification is greatly appreciated.
8/7/2019 10:03:13 am
Anonymous pizza driver, we are looking into this to try and find clarification on this, stay tuned.
8/16/2019 11:54:08 am
For your question, please refer to the BOLI FAQ page to find the Q&A below: https://www.oregon.gov/BOLI/WHD/pages/Frequently-Asked-Questions.aspx#Tips
9/26/2019 03:07:21 pm
Is it legal for an establishment to force or coerce employees into a tip pool without prior knowledge or consent? And can an employer let you go for not wanting to participate in a tip pool?
11/14/2019 03:37:32 pm
We are a family owned corporation where we all work in the FOH and BOH . We also have additional staff during the busy season and on weekends. Is it permissable for the wait staff to tip back of the house if he/she wants to?
11/14/2019 04:29:41 pm
Prior to the recent rule change, employees could participate in a tip pool between front-of-house and back-of-house staff if they chose to do so. With the rule change, managers can now require employee participation in a tip pool between customarily and non-customarily tipped employees. If managers choose not to implement a mandatory tip pool, employees can still choose to participate in one. However, with the new rule, managers, supervisors, and owners cannot participate in the tip sharing.
3/21/2020 05:01:54 pm
at my job job one of the owners works the counter and takes a share of tips? I am a prep cook and everyone the cooks the dishwashers and the owner get tipped out before I do and I make all the dough for this pizza place.
6/16/2020 06:14:47 am
owner should not take share in tips.
6/22/2020 10:25:24 am
8/18/2020 09:43:59 pm
Our small restaurant operation has 3 operating minority partners (chef, manager, HR & accounting) none of which own more than 7% interest in the company.
9/10/2020 03:57:38 pm
Hello Devon, we are trying to get clarification for you on this, thanks for your patience.
Shari N. Bostelman
11/15/2020 04:00:05 am
I am a bartender/server at a relatively small place where when i am working i am the only FOH staff. This means I greet all customers, take and enter orders, set tables, make and bring drinks, bring food and any additional requests (ie sauces, more napkins, utensils, etc.), take payment, bus and clean table. My employer just started requiring FOH to tip out BOH at 13% of food sales. I often am barely making that on the food sales. Some tables do 15%, but this is older community and many are more like 10%. We do a lot of take out as well..which i handle the customer order and payments, but folks don't always tip at all, or tip less. This means in order to satisfy their requirement, I have to use tips I received from customers who only came in for drinks, which I am the only person doing all parts of the service, including dishwashing. The labor is not shared in any way. Lately, I go home with less tips than the cooks although the tips were expressly given to me for my service. Is this legal? Is there an industry standard on tip sharing? I have always tipped out BOH, but based on tips I actually earned that shift- not on sales. They originally required 10% of food sales and recently raised to 13% and it just seems like an awful lot considering who knows what kind of tips customers will give that day. I am familiar with percentager of tips received, do other places do percentage of sales?
1/15/2021 01:06:29 pm
Shari, there are numerous practices out there, not sure of any standard on tip sharing (outside of DOL's rule). More info: https://www.dol.gov/agencies/whd/flsa/tips.
1/12/2021 04:03:09 pm
Am noticing that most of the questions are base upon full service restaurants. What about the smaller ones (think Noodles and Co, or McDonalds), where one person takes the order, and a credit card is used to tip. Does that tip belong ONLY to the cashier? When the pandemic started, most of our customers would tip above and beyond to help us continue being open (those tips were on the credit card and left in the bank - the funds were never put in anyones pocket).
1/21/2021 02:09:43 pm
I am a cook in small restaurant I want to know about tip pooling. Normally in our restaurant do 80 for FOH and 20 for BOH but FOH do just packing order and talk with customer since we do only take out, so after this we will get 50:50 or split evenly how would that work? and i used to be server for years and my family is working in the kitchen I know how hard work of BOH is. for me I think all the service is from everyone in the restaurant but mostly every order are made by kitchen. pls suggest what should we do to let my boss follow this.
1/22/2021 08:02:19 am
Chanut, here's a one page information sheet on tip pooling that may help your employer: https://www.oregonrla.org/uploads/9/7/9/8/97983354/tippooling-010621.pdf
3/17/2021 01:21:29 am
I work for an employer who thinks that she is entitled to our cash tips. She requires that we pool tips, at the end of every shift all our cash tips are left in a jar. Many times my check feels short, I've brought it to her attention but she refuses to allow us to pool our tips at the end of each work day and split it among our co-workers, she feels she must be in charge of our cash tips. I don't know if that is legal and I'm tiring to find answers.
3/17/2021 10:33:53 am
While tip pooling is legal now in Oregon, managers and supervisors are still prohibited from participating in tip pools. The FLSA's final rule includes the following clarifications: "explicitly prohibits employers—regardless of whether they take a tip credit—from keeping employees’ tips for any purpose, which includes prohibiting managers and supervisors from keeping tips received by employees" and also, "amends its regulations to state that an employer that collects tips to facilitate a mandatory tip pool must fully redistribute the tips no less often than when it pays wages to avoid “keep[ing]” the tips in violation of section 3(m)(2)(B)."
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