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Is tip pooling legal?

Tip pooling is the process of gathering all the tips from employees who earned them, combining that money, and then redistributing it. Typically, the distribution means everyone gets an equal amount, even if they earned different amounts.

For instance, Employee A makes $300 in tips. Employee B makes just $50. Employee C earns $250. This all occurs on the same night, so the tip pool now has $600. It gets split up and each of the employees takes home $200 in tips. Is this legal?

This is legal, but there are specific guidelines that employers have to follow. The main issue is that the employer cannot pay themselves, the supervisors or others in a position of authority. The tip pool must only pay back out to the group of employees who, while working together, earned those tips. The law states that tips must go to those who earned them. Legal interpretations have determined this applies to groups as well as individuals.

That does not mean tip pooling is not controversial. In the example above, Employee A and Employee C both feel like they took home less than they earned, while Employee B makes far more than he or she earned and appears to benefit from the work of the others. Employees should know about tip pooling in advance so they can decide if they want to be part of the process or if they’d like to seek other employment.

If you feel that your employer has violated your rights, perhaps by paying themselves out of the tip pool, make sure you are well aware of all of the legal options that you have.