Tip-Pooling: Are you in compliance with both Colorado and Federal law?

Anyone who has worked in the restaurant industry knows it is common practice among restaurants and other hospitality businesses to participate in tip-pooling. The act of tip pooling describes a procedure wherein all tipped employees put their tips together and the tips are then split amongst the employees. While employees may have concerns about tip-pooling and the potential effect on their income, many are unaware of the numerous legal discrepancies and violation of their rights under both Federal and Colorado law.

In Colorado, the law permits the participation of everyone in a tip pool, however, the Federal law does not. If you are working for a restaurant where tip-pooling is a common practice it is important to know whether your employer is in compliance with both Colorado and Federal law.

According to the Fair Labor Standards Act “FLSA”, managers and supervisors cannot be included in a tip pool. Outside of managers, supervisors, and employers, the determination of who can participate in the tip pool depends on whether or not the employer takes a tip credit. 29 U.S.C.S. §§ 201 et. seq.

A tip credit allows employers to pay tipped employees a wage lower than the federal minimum wage. If an employer takes a tip credit, additional restrictions on who can participate in the tip pool apply, such that only those employees who customarily and regularly receive tips can be in the tip pool. Turner v. Millennium Park Joint Venture, LLC, 767 F. Supp. 2d 951 (N.D. Ill. 2011). In other words, only employees who maintain more than a de minimus interaction with customers as part of their employment and those employees who are ordinarily engaged in personal customer service may participate in tip-pooling. Employees who customarily and regularly receive tips might include waiters, waitresses, bartenders, bellhops, and counter personnel. If your employer takes a tip credit, the inclusion of people in the pool who don’t normally receive tips, such as dishwashers, cooks, chefs, and janitors is in violation of the FLSA. Pedigo v. Austin Rumba, Inc., 722 F. Supp. 2d 714 (W.D. Tex. 2010). Furthermore, the inclusion of managers or supervisors in the tip pool can violate the FLSA. Such violations may entitle you to compensation.

If you work in a restaurant where a tip-pooling practice is implemented you may have a claim against your employer entitling you to compensation. Our knowledgeable and experienced attorneys have a wealth of knowledge on Colorado and Federal wage laws and can assist you in determining whether you have a potential claim. If you have any questions about tip pooling and your employer’s compliance with both Colorado and Federal law please contact our office today.