Tip pools are not allowed in all states, but they are in California. An employer can choose to use a tip pool and make all the employees combine their tips at the end of the night. The tips are then split evenly between those employees.
As a business owner, you may be interested in using a tip pool because you believe that your customers will appreciate it. If they have the freedom to talk to any member of the waitstaff, they can get what they need in a prompt fashion. They don’t have to worry about tipping one specific individual or only ordering from one person.
As noted, you are allowed to do this in California. But there are some common oversights people make. A simple mistake on your part could lead to allegations of wage-and-hour violations.
You cannot be part of the pool
First and foremost, as an employer, you cannot be included in the tip pool. This is even true if you help your waitstaff, perhaps by carrying items to the tables or bringing dirty dishes back. It is illegal for employers to be involved in the tip pool at all, as that would deprive the waitstaff of some of the tips that they earned. Make sure you don’t include yourself or any of the other employees, such as managers or supervisors, who aren’t directly involved in getting the tips.
The pool cannot put an employee under minimum wage
Another potential mistake would be if the employee wouldn’t make minimum wage with their new tips. For instance, maybe an employee made $200 in tips during the day. If they got to keep that $200, they would certainly have earned more than minimum wage as an hourly wage base. But if they have to split the $200 with five other employees, that may drop their base rate under minimum wage. This is always illegal, and employers have to make sure that they are paying everyone at least minimum wage, even service workers who take tips as part of their compensation. The tips plus the wage must be minimum wage.
Are you facing allegations?
If you are facing accusations that you violated your employees’ rights, be sure you know what options you and your business have.