Tipping Laws, Overtime, and Other Legal Insights for the Service Industry
Posted June 19, 2024
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From bustling cafes to five-star restaurants, service industry workers play an integral role in bringing experiences to life for customers. Yet, behind the scenes, there's a maze of laws and regulations that impact their daily lives. For both employers and employees, understanding these legal intricacies can be as essential as mastering the menu. Let’s break down the main legal ingredients.
Tips, Tip Pools, and Service Charges
The distinction between tips and service charges is important for tipped employees. Tips, under the Fair Labor Standards Act (FLSA), are considered the sole property of the tipped employee. This means employers cannot take any portion of an employee's tips for themselves.
However, there can be a system for sharing tips among certain employees. Employers can require tipped staff to participate in a tip pool, where a portion of their tips are combined and then redistributed among a group of employees who customarily receive tips, such as servers, bartenders, or bussers. It's important to note that kitchen staff or management cannot be included in a tip pool, as they don't typically receive tips directly from customers.
Service Charges vs. Tips
Be aware that some restaurants may add a "service fee" or "gratuity" to your bill. Legally, these service charges are not considered tips. If an employer distributes any part of this service charge to employees, it's treated as wages and subject to minimum wage and overtime regulations. This is different from tips, which are not counted towards minimum wage requirements.