Is it Legal to Tip Chefs? 4 Surprising Facts About Restaurant Tip Laws

By: Marlo Spieth

4 Minute Read

Jan 25, 2017

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I Dont Tip

Nice Guy Eddie:

You don’t tip?

Mr. Pink:

No. I don’t believe in it.

Nice Guy Eddie:

You don’t believe in tipping?

Mr. Blue

Do you know what these chicks make? They make nothing.

Mr. Pink:

Don’t give me that. She don’t make enough money, she can quit.

So begins the 1992 film Reservoir Dogs, directed by Quintin Tarantino. While the point of this scene is to deconstruct cultural norms, this particular example strikes a nerve. Doesn’t Mr. Pink know that servers are paid below minimum wage?

As a restaurateur, its pertinent to know the nuances of restaurant tipping in order to make informed decisions about wages. To that end, here are a few notes about restaurant tip laws today.

1. State and federal policies contradict in tip law. 

As a citizen of the U.S., it’s almost like you're the child of divorced parents with joint custody. The federal government and the state government each have their own laws, sometimes directly opposing each other. This creates a grey area of legality that, unfortunately, isn’t uncommon. The Federal Department of Labor has strict guidelines about the legalities of tipping, which are outlined in the Fair Labor Standards Act, specifically Fact Sheet #15.

It’s relevant to note that some states, like New York, have made their own laws about tip pools and tip shares. Theoretically, federal law should have the trump card, but it realistically comes down to enforcement. It’s unlikely that the FBI would get involved over a tipping dispute. So, be sure to check on your state’s specific wage laws before accusing anyone of illegal activity.

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Some states have made their own laws about tip pools and tip shares. Don't forget to check yours.

2. Back of the house can’t be included a tip pool.

In a tip pool, all of the restaurant’s tips are put together and divvyed up equally between those that received them. The Department of Labor totally excludes BOH from this practice because of “tip credits”. Tip credits are the legal allowances that let restaurant owners count tips toward their server’s wages.

Tip credits may not be applied to cooks, dishwashers, or runners; these folks must be paid the full minimum wage. Therefore, in the eyes of the Federal government, tip pools are reserved for those that are customarily tipped, because they are customarily paid below the minimum. Equally, this also means that management can never take a cut of the tip pool for themselves.

The unintended outcome of this rule is that those who make the product (cooks, dishwashers) are compensated less than those that sell the product (servers).

3. Actually, not all servers are paid below the minimum wage. 

Most states allow tip credits. This means that a restaurant owner can count a server’s tips toward their salary.

California, Montana, Nevada, Minnesota, Oregon, Alaska, and Washington have actually outlawed this custom. So, in these states, servers are paid the state minimum wage in addition to the tips given by customers.

Some restaurants, especially in the states above, have adopted a “no tip” policy altogether. The “no tip” system helps keep wages fair across the restaurant. An employer can take a percentage of the profits and divvy it up to include not only servers, but BOH and others as well.

4. Tips cannot be collected to cover dine-and-dash situations.

According to the Department of Labor, a tip is “the sole property of the tipped employee." Therefore, save for a valid tip pool, a manager can never collect tips, even to cover the cost of an employee mistake, which, in a legal sense, includes:

  • cash or cash register shortages
  • accepting bad checks
  • accepting counterfeit currency
  • having a table that walks out
  • lost, damaged, or broken equipment

Depending on the state, an owner may have the right to deduct the cost from the employee’s paycheck. To check the policy of your state, see this state-by-state guide to wage deductions.

In conclusion

As a restaurant owner, be sure to fully understand the Wage and Fair Labor Standards Act as well as state laws before making any decisions. If you’re in need of quick advice or an employee contract review, Avvo offers easy legal services related to business formation.

And finally, Mr. Pink’s closing statements in prosecution of the tipping system: 

i-dont-tip.gif

Mr. Pink:

I’m very sorry the government taxes their tips…. That ain’t my fault. It would appear that waitresses are one of the many groups that the government [cheats] on a regular basis. If you show me piece of paper that says “the government shouldn’t do that”, I’ll sign it. Put it to a vote, I’ll vote for it, but what I won’t do is play ball….

Mr. Orange:

He's convinced me. Give me my dollar back!

Please note: The views and opinions expressed herein are the author’s alone and do not represent Avvo. Also, the legal information herein is intended for general informational purposes only and is not the provision of legal services. Please acknowledge that such information consists of third party data and contributions, that there are certain inherent limitations to the accuracy or currency of such information, that legal and other information may be incomplete, may contain inaccuracies, or may be based on opinion.

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