Evolving Legislation on Tip Pooling

Previously, in California, it was illegal to tip back of house (chefs, dishwashers, other kitchen staff) employees, because they were being paid a minimum wage, and employers could not apply for tip credit. Other states were able to pay employees below the minimum wage if they believe that the employee will make up the difference in tips, thereby giving the employer a tip credit. In California, the minimum wage is enforced and is not dependent upon tips. Thus, in California it was illegal to tip the kitchen staff.

Recent legislation that passed late March, recognizes that all employees are eligible for tip pooling – front of house and back of house – as long as they are being paid minimum wage.

Should your business implement tip pooling, some quick guidelines:

  • Employees that interface most with the customer should get the largest percentage of the pooled tips – distribution of tips should be proportional to employees’ interaction with the customer
  • The actions and responsibilities of the employees, not necessarily the job title, are more important when determining how much employees interact with the customer, and, consequently, his or her share in the tip pool
  • As standard practice, it is illegal for the employer, or agent of – managers, supervisors, etc. – to share in the tip pool, regardless of their level of interaction with the customer, even if a tip was left specifically for such an agent

Source: California Restaurant Association – Employer Mandated Tip Pooling Guidelines

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