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Are tip pools a form of wage theft?

On Behalf of | Jun 29, 2022 | Employment Law

A restaurant owner may decide that they would rather use a tip pool than allow each employee to collect their own tips. All this means is that, when tips collected from the tables, they are combined into a single pool and then divided fairly or equally among the service staff.

Owners and managers sometimes like this idea because it frees the servers up to help people at any table, at any time, without worrying about their tips going somewhere else. The owner may think that this will be a better environment for their customers, and the waitstaff can all expect to get a fair portion of the tips anyway.

However, some employees don’t like the idea because they essentially think of it as wage theft. The servers who are accustomed to receiving the most in tips may feel their tips are unfairly being taken and given to lower performers. Are tip pools legitimate or a form of wage theft?

Properly established tip pools are not wage theft

Pooling tips among tipped workers and dividing them fairly or equally is generally legal in California. The key is that the tip pool must be set up properly. The employees need to know that it is going to exist and that it is involuntary. As long as the only people who pay into it and receive money out of it are in the chain of service, this is legal under California law.

Tip pools can include bussing staff and bartenders. These employees can be considered in the “chain of service” that can properly receive a portion of the tips. The key here is that the division of the tips must be fair and reasonable.

When a tip pool may become wage theft is if the restaurant, the owner or a supervisor begins to take money from the tip pool. Supervisory employees and owners cannot legally be included in tip pools. This is true even when they sometimes help the waitstaff by bringing a drink out to someone’s table or doing something else of this nature. If the business, the owner, a manager or a supervisor is included in the tip pool, this could be considered a form of wage theft.

Servers in restaurants are entitled to their tips, but a fair or equal division of all the day’s tips is a legal way to ensure they receive them. If you believe your employer is taking some of your lawful tips, you should explore your legal rights and options.

Leigh Law Group represents employees in wage and hour cases throughout California.