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‘Tip pools’ are limited by federal law

Businesses can require their tipped employees to participate in “tip pools,” in which they contribute all their tips to a pot and then share them according to some formula.

As a general rule, a tip pool can only include employees who regularly receive tips. So for instance, a restaurant can require all its waiters to share tips among themselves, but it can’t require them to share their tips with prep cooks and dishwashers.

You should also know that a business can pay its tipped employees less than the federal minimum wage, as long as the employee makes at least the federal minimum once tips are taken into account.

One thing that has been unclear, however, is whether a business that pays all its employees at least the federal minimum – and thus doesn’t force its workers to depend on tips to make that amount – can then legally require tips to be shared with untipped employees.

In the past, a federal appeals court had ruled that businesses could do so, but the Labor Department disagreed.

Just recently, though, the appeals court changed its mind and decided that the Labor Department was right after all. That means that waiters and other tipped employees can’t be forced to share their gratuities with untipped workers, regardless of how much they get paid in wages.

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