The tip credit is a land mine for employers in the service industry. As we all know, the tip credit allows for employers to pay a lesser hourly rate to employees who receive tips as compensation as long as it can show the tips are enough to otherwise meet the minimum wage. According to the Fair Labor Standards Act, proper tip pooling is allowed as well. Many restaurants and service industries utilize tip pooling in order to tip out bussers, barbacks, and bartenders. However, may establishments misuse the tip credit.
A recent class action lawsuit filed against New York restaurant Le Cirque exploits the complications of tip pooling. In the suit, the class of plaintiffs allege that they were forced to tip out captains and other management staff. The Department of Labor and Fair Labor Standards Act absolutely bar requiring tipped employees to share tips with management or the establishment itself. While busboys, hosts/hostesses, and bartenders are proper participants in tip pooling, going much further than that could land your establishment in hot water.
If you have questions about your tip pooling arrangement, payment of wages, or your service establishment's employment policies, please contact Jonathan M. Boulahanis and the Clark Hill Food and Beverage Team.
http://eater.com/uploads/le-cirque-lawsuit.pdf
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