DO NOT share tips with back-of-the-house employees!!! $50,000 Fines involved!!
In the restaurant business, we all know the pay discrepancy between servers and cooks. Cooks and dishwashers are some of the hardest working individuals in your restaurant, yet they can’t share in tips because restaurant tip sharing is against the law.
Because of this law there continues to be a huge discrepancy in take home pay between front-of-the-house (FOH, includes waiters, waitresses, bellhops, counter personnel, bussers, and service bartenders) and back-of-the-house (BOH, includes dishwashers, cooks, chefs, and janitors). Restaurant owners would like to address this pay discrepancy but the law doesn’t allow you to address this problem through tip pooling.
When I was in the business, I made a bold decision to have servers give a small percentage to the back-of-the-house (BOH) staff to help them feel the appreciation from the customer. In my opinion, most customers expect that tips are divided among everyone who makes up the dining experience. The practice ended abruptly after a Department of Labor audit.
According to the US Department of Labor (USDOL), Wage and Hour Division fact sheet on tipped employees: The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers, and service bartenders. A valid tip pool may not include employees who do not customarily and regularly received tips, such as dishwashers, cooks, chefs, and janitors.
There is a sound basis for this uneven pay scale; servers, in most states, are paid a sub-minimum wage with the understanding that tips make up the wage to at least minimum wage. The problem is that tips make up way more than the sub-minimum wage and servers walk away from a partial day’s work with substantially more hourly than their kitchen counterparts. Congress was protecting servers by making this rule about tip sharing without understanding the economics of a restaurant and how the guest experience is made up of a team, not just the server.
Service charges are different. If you charge a service charge, you pay income tax but that becomes the businesses money to use as it sees fit. Servers can voluntarily share tips with BOH but the business can have nothing to do with the exchange or suggest a percentage.
One small restaurant was fined $50,000, $25,000 in back wages and $25,000 in liquidated damages to 42 employees. No matter your bleeding heart for your kitchen staff, do not allow them to share in tips. Show them this article if they have questions.
Please don’t let this be you!!! DO NOT SHARE TIPS WITH BOH EMPLOYEES!!!
