Tip pool rules: can your employer take your tips?

Can your employer take your tips? No. Under federal law, your employer, its managers and its supervisors cannot keep any part of your tips, whether or not the employer takes a tip credit. What an employer can do is require you to share tips with certain coworkers through a tip pool or tip-out. These tip pool rules decide who can be in it.

Can my employer take my tips?

Since a 2018 change to the Fair Labor Standards Act, an employer may not keep employees' tips for any purpose. That includes letting managers or supervisors keep a share. The rule applies whether you are paid $2.13 an hour or $20.

In practice that means:

• Card tips have to be passed on to you. The only thing that may come off them under federal law is the processing fee on the tip itself (more below).
• The house cannot keep part of a pool to cover breakage, walkouts or other costs.
• Managers cannot take a cut of the pool, even on a busy night when they help out.

A mandatory service charge is different. Under federal law it is not a tip, though some states treat certain charges as belonging to staff. See is a service charge a tip.

Tip pools and tip-outs

A tip pool collects tips from several workers and splits them by a set formula, such as by hours or by points per role. A tip-out is when you pay a share of your own tips or sales to specific coworkers, like 2 percent of sales to the bussers and 1 percent to the bar.

Federal law treats a required tip-out the same as a required tip pool. Your employer can make either one a condition of the job in most states, as long as only eligible people get a share and you are told what you are expected to contribute.

Who can be in a tip pool

Under federal law, who can share depends on whether your employer takes a tip credit, meaning it pays tipped staff less than the full minimum wage in cash.

Managers and supervisors

Federal law looks at what a person does, not their title. Someone counts as a manager or supervisor if their main job is managing the restaurant or a department, they regularly direct the work of two or more employees, and they can hire or fire (or their recommendations on that carry real weight).

A shift lead who mostly serves tables and has no say in hiring may not meet that test. A general manager who seats guests on a busy night still does. A manager may keep a tip a customer gives directly for service the manager alone provided, but may not take anything from the pool.

Back-of-house

If your employer pays tipped staff less than the full minimum wage, the pool must stay among employees who customarily and regularly get tips. Cooks and dishwashers cannot share.

If everyone in the pool gets at least the full minimum wage in cash, federal law allows the employer to include back-of-house staff. The employer cannot take a tip credit for anyone in that wider pool. Some states do not allow this at all (see below). The back-of-house page covers it from the kitchen side.

How state tip pool rules differ

States can add limits on top of the federal rules, and several do:

• No back-of-house, even without a tip credit: New York, Massachusetts, D.C., North Dakota and West Virginia limit pools to service staff. New York lists roles that personally serve customers, such as wait staff, bussers, bartenders, barbacks, runners and hosts.
• No required sharing at all: Minnesota bans employer-required tip sharing of any kind, even among servers. Only sharing that employees arrange voluntarily is allowed.
• Limits on how much you give up: North Carolina requires that you keep at least 85 percent of your tips. Delaware allows a required pool only when more than one direct service employee serves the same customer, and caps it at 15 percent of the main server's tips. Washington says no one can be required to put in more than they received.
• Stricter on managers: California bars owners, managers and supervisors from any part of a pool, even when they serve tables themselves.
• Extra steps: North Dakota requires a vote of more than half the tipped employees to set up a pool, with a written record. Pennsylvania requires written notice of a pooling arrangement before it takes effect. Colorado requires a posted notice telling customers tips are shared.

Your state page lists the pool rules where you work.

Tip-outs based on sales

Many restaurants set tip-outs as a percentage of your sales, not your tips. On a night when guests tip poorly, a 3 percent sales tip-out can eat a large share of what you actually made.

Under federal rules, an employer that takes a tip credit can only count the tips you end up keeping after the tip-out. If a heavy tip-out pushes your cash wage plus kept tips below minimum wage for the workweek, the employer has to make up the difference. The tip credit guide walks through that weekly math.

Credit card fees on tips

Under federal law, an employer may subtract the card processing fee that applies to the tip itself, and nothing more. With a 3 percent fee, a $10 card tip can be cut to $9.70. The employer cannot charge you the fee on the whole bill, and the deduction cannot take your pay below minimum wage.

Some states go further. California, Massachusetts, Minnesota and Pennsylvania do not allow the fee to come out of tips. In Colorado, taking it cancels the employer's tip credit. Pennsylvania also bars taking it out before a pool is split. New York and Rhode Island allow your pro-rated share of the fee; Rhode Island requires that you be told in advance. See credit card tip fee.

What to check on your pay stub

• Card tips: compare charged tips on the check with your own checkout reports. Any gap bigger than the card fee on those tips is worth asking about.
• Tip-out lines: if your tip-out comes out through payroll, check that it matches the agreed percentage and the sales or tips it is based on.
• Who is in the pool: ask for the written pool policy or ask who gets a share. If a manager, supervisor or owner gets one, or the kitchen shares while you are paid a tipped cash wage, that is a problem under federal law.
• Slow weeks: after tip-outs, did your cash wage plus tips reach minimum wage each workweek? If not, look for a make-up line.

The paycheck checker asks who is in your pool and flags managers or back-of-house staff where your state does not allow them. The pay stub guide shows where tip lines usually appear.

If something is off, start with your manager or payroll; the letter template helps. If it is not fixed, your state labor agency or the U.S. Department of Labor takes wage claims for free, without a lawyer. See next steps if you are underpaid. TruWage is a calculator, not legal advice.