Tip Pooling & Distribution Policy

Policy governing tip pooling arrangements, tip credits, and fair distribution of gratuities among front-of-house and back-of-house staff.

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What this document covers

The 2021 DOL Final Rule clarified tip pooling and tip credit rules under the FLSA. Restaurants must have a written policy if they use tip credits or operate tip pools. The policy must define who participates, how tips are calculated and distributed, and ensure managers and supervisors never participate in tip pools. Violations can result in back pay for all affected employees.

Key sections included

Tip credit disclosure requirements
Tip pool participant eligibility
Distribution calculation method
Manager/supervisor exclusion policy
Dual-role employee rules
Record-keeping requirements
Employee acknowledgment form

Frequently asked questions

Can back-of-house staff participate in tip pools?

Yes, under the 2021 DOL rule, back-of-house staff (cooks, dishwashers) can participate in tip pools IF the employer does NOT take a tip credit.

Can managers receive tips?

No. Managers and supervisors are prohibited from participating in tip pools under the FLSA, regardless of whether a tip credit is taken.

Document details

Legal basis: FLSA Section 3(m); DOL Final Rule 29 CFR 531
Enforced by: Department of Labor (DOL)
Penalty for absence: Loss of tip credit for all tipped employees (employer pays full minimum wage); back pay liability; DOL penalties up to $1,100 per violation.
Category: Employment & HR

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