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What can we do about pooling tips?

Q. I work at a restaurant full time, and most of what I earn is based on tips. We have always kept our own tips, but the new manager decided [we] are now going to pool tips. No one on the wait staff is happy about it, and we are now making less than we used to. I’m not saying he is skimming, but I want control of the money people leave me. What can we do about this?

A. Changing the way anyone gets paid is not something employees typically enjoy unless compensation goes up. How organizations deal with tips has been a matter of much controversy over the last few years. To get accurate information, I consulted with Daniel Field, an employment attorney at Morgan Brown and Joy, LLP in Boston who explained: ‘unless the restaurant is skimming or distributing tips improperly, the new tip pooling policy at this restaurant is probably lawful’.

Massachusetts and federal law allow employers to mandate that restaurant employees participate in a tip pool; this is often done to ensure that all employees who serve customers receive a fair share of the tip. Tip pools are subject to several important legal restrictions. The Massachusetts Tip Law forbids an employer from requiring any wait staff employee to participate in a tip pool where tips are distributed to anyone other than wait staff employees or service bartenders. A wait staff employee is defined by law as a person who provides direct service to patrons, such as serving food and beverages, running food or bussing tables. Service bartenders do not have to provide direct service to share tips, but can simply prepare "alcoholic or nonalcoholic beverages for patrons to be served by another employee." The federal minimum wage law, (Fair Labor Standards Act) further prohibits tip sharing with employees who do not customarily and regularly receive tips, such as kitchen and administrative staff.

Management employees may not share in tips, whether they are pooled or not. According to the Massachusetts Attorney General’s Fair Labor Division, which enforces the law and where Field formerly served as Chief, “Workers with limited managerial responsibility, such as shift supervisors, assistant managers, banquet captains and many maître d's may not participate in tip pools. Managerial responsibilities can include supervising banquet events, making or influencing employment decisions, scheduling shifts or work hours of employees, supervising employees and assigning servers to their posts.” A federal appellate court recently ruled that this means that employees, such as servers in coffee shops who act as shift supervisors and who have only “exceedingly slight” supervisory duties, may not participate in tip pools.

Massachusetts law provides for significant penalties when a tip pool is administered incorrectly– whether it is employer-mandated, or employee organized. Even inadvertent mistakes by restaurants can have serious consequences, and can permit employees to recover from their employer three times the amount of their lost tips, plus their attorneys’ fees. Many local restaurants, resorts and coffee shops, large and small, have faced multi-million dollar judgments after erroneously including supervisory, administrative or kitchen staff in a tip pool. The law is controversial and some employers have responded by forbidding tipping altogether, while others have cut lower level supervisors out of tip pools, as seems to be mandated by the law.

Daniel Field is partner with Morgan, Brown & Joy, LLP which represents employers exclusively in employment and labor law matters.

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