The Side Dish

Finance to Table Education for Operating Your Restaurant

New tip pooling rules proposed by Department of Labor

Operators of full-service restaurants should take note of recent developments from the United States Department of Labor, regarding regulations governing the use of tip-pooling arrangements. There is one caveat to be aware of, which is that the non-tipped duties must be performed in conjunction with tipped duties, or within a reasonable amount of time before or after tipped duties.

Don’t miss: Gift card accounting for the holidays

For restaurants that do choose to count tips paid to waitstaff as part of their minimum wage, and then claim a tip credit for these wages, regulations will not change. For these operations, only customarily tipped employees may participate in a tip-pooling arrangement, and back-of-house employees are excluded from participation.

The Department of Labor made sure to clarify that is still strictly forbidden from sharing in waitstaff gratuities, which has been and remains illegal. This includes management and ownership of the establishment. Significant fines can be imposed upon restaurants breaking this cardinal rule.

In addition to tip-pooling rules, the proposed regulations would eliminate the “80/20 rule”, which is generally used to determine whether tips earned by waitstaff can be considered part of their wages for work performed in non-tipped duties. If these non-tipped duties exceed 20% of the employee’s time, the employee has the right to demand payment of their full minimum wage from the employer.

These proposed regulations are currently available for public comment, which will be taken into consideration before final regulations are issued.


Austin Bradley, CPA