The U.S. Labor Department wage and hour division is continuing its pursuit of restaurant owners involving issues of improper tip pools. This scrutiny has been conducted under the framework of the Fair Labor Standards Act (FLSA), which explicitly establishes that business owners and managers may not share in their servers’ tips. Nevertheless, in recent events, it has been announced that recoveries have been made against two restaurants, under accusation for misappropriation of tips provided to their employees.
It is important to note that tip pooling and sharing are not illegal under the FLSA, provided they follow appropriate practices. Staff must be made aware of the process, and only those who customarily and regularly receive tips can be included in the pool. The law is clear that owners, managers or supervisors cannot be part of this pool.
The recent cases that have come under the Labor Department’s scanner focus on situations where restaurant owners or managers are alleged to have breached this requirement. On account of these allegations, significant financial recoveries have been made on behalf of the affected employees. Detailed legal information about these cases and the corresponding enforcement measures by the Department of Labor can be found here.
This relentless scrutiny of the Labor Department should serve as a caution to restaurant owners and employers in the wider hospitality sector. It is now more vital than ever to comply with FLSA regulations, particularly in the realm of tip pooling. For legal professionals working in corporate settings, ensuring their clients are well-prepared and knowledgeable about these laws is paramount.