COMP NEWS – The majority of Americans view tip pooling, a practice where restaurant servers pool their combined tips and distribute them evenly, as an unfair compensation practice for employees.

  • Most U.S. adults in a recent Pew Research Center survey said that the fairest way to distribute tips in a restaurant setting is to allow each server to keep all money they receive in tips, as opposed to a tip pooling arrangement.
  • Only 14% of the nearly 12,000 respondents said that the fairest method of tip distribution is a tip pool that includes all restaurant staff, while 13% said that a tip pool that includes only servers is fairest, according to Pew.
  • A majority of respondents said that tipping is expected in more places in 2023 than five years ago, but 40% said they were opposed to businesses suggesting tip amounts, while 24% favored this practice. Respondents most commonly tipped when eating at restaurants with servers. Only 12% tipped “always” or “often” at non-server restaurants.

Legally, the move to solidify tip pooling was permitted under the Trump administration, while the Biden administration modified aspects of it in 2021. Nonetheless, the arrangement remains controversial with service industry employees and thoroughly unpopular with customers.

Tip pools have proved a controversial wage-and-hour topic, especially “nontraditional” tip pooling in which employers distribute pooled money among workers both in traditionally tipped roles, like wait staff, and those in non-tipped occupations such as kitchen staff.

Such arrangements are permitted under Fair Labor Standards Act regulations if the employer pays employees at least the federal minimum wage. If an employer does not pay the federal minimum — and instead takes a “tip credit” toward its minimum wage and overtime obligations — that employer may only include employees who customarily and regularly receive tips in a tip pooling arrangement.

The move to allow for nontraditional tip pools was solidified under the Trump administration, which issued a final rule in 2020 that granted employers the ability to do so under the FLSA provided that they do not take a tip credit. In 2021, the Biden administration allowed some components of the final rule to take effect but withdrew and modified others. For example, DOL clarified that while managers and supervisors may not receive tips from tip pools, they are not prohibited from contributing to mandatory tip pools.

To read more about the public perception of tip pools, click here.

For more Comp News, see our recent posts.

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