Tip Sharing Regulations for Employers

The Department of Labor just released a new Wage & Hour opinion letter on one of those topics that always makes restaurant and hospitality employers nervous — tip pooling under the Fair Labor Standards Act. The question is whether "front-of-house" oyster shuckers can be included in a tip pool with servers when the employer takes a tip credit toward minimum wage? 👉 The DOL says yes — if those shuckers actually interact with customers. In this case, the oyster bar was part of the dining space. Customers sat at the bar, watched the shuckers work, asked questions, got recommendations, and generally interacted with them like any other part of the service team. Because of that customer-facing role, the DOL said they're "employees who customarily and regularly receive tips." But the letter draws a clear line: 🦪 Front-of-house shuckers (in customer view, engaging and explaining) = okay to share tips. 🦪 Back-of-house shuckers (in the kitchen, no customer contact) = not okay. That's consistent with decades of FLSA tip-pooling law. Only employees who customarily and regularly receive tips can be in a mandatory pool when the employer is taking a tip credit. That list usually includes servers, bartenders, barbacks, and bussers — the folks who are part of the customer service chain. It does not include cooks, dishwashers, or other kitchen staff. 💡 So how does this play out in a craft brewery taproom or brewpub? Think about who's truly "front-of-house": 🍺 Your bartenders and servers? Absolutely. 🍺 The beertender running flights or offering tastings? Probably yes, since they are part of the guest experience. 🍺 The brewer who occasionally pokes their head out of the back or the kitchen cook who drops off food? Probably not, and risky to conclude otherwise. The DOL's logic is simple: if an employee is part of the guest experience — talking to customers, describing products, answering questions — they're likely "customarily tipped." If they're behind the scenes, however, they're not. The bottom line is that visibility and interaction matter. If you're going to include someone in your tip pool, make sure everyone included customarily and regularly receives tips and interacts with customers. Otherwise, that "pool" could spring an expensive litigation leak.

Today’s #HR tip; don’t let managers and supervisors poach employee’s tips! The law prohibits an employer, including managers and supervisors, to keep any portion of tips received by employees. A Hawaii restaurant is paying 158k after learning this lesson the hard way. Not to be outdone, a Pittsburgh pub is paying $184k for the same lesson! By poaching employees’ tips, the tip credit claimed by the employer became invalid and the employer was required to return the tips to employees and pay them the full federal #minimumwage. And of course, #overtime and minimum wage damages are doubled, and the DOL can add penalties for willful conduct. So a little poaching of tips has big ramifications! The #FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or through a tip pool.  An employer may not require an employee to give their tips to the employer, a supervisor, or a manager, even where a tipped employee receives at least minimum wage in wages directly from the employer and the employer takes no tip credit. Now a manager can get tips the right way, by earning them. So if a #restaurant manager serves his own  tables, he may keep the tips received directly from his customers he served but would not be able to receive other employees’ tips by participating in a #tip pool. For FLSA purposes, managers and supervisors include any employee:  (1) whose primary duty is managing the enterprise or a customarily recognized department or subdivision of the enterprise;  (2) who customarily and regularly directs the work of at least two or more other full-time employees or their equivalent; and  (3) who has the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring or firing are given particular weight.  Business owners who own at least a bona fide 20 percent equity interest in the enterprise in which they are employed and who are actively engaged in its management are also managers and supervisors who may not keep employees’ tips.  FLSA laws are complicated, so do not do it alone; reach out to a friendly #employmentlaw attorney for guidance before the Department of Labor comes to investigate! #employeerelations #floridabusiness #wageandhour

💷 𝐍𝐞𝐰 𝐭𝐢𝐩𝐩𝐢𝐧𝐠 𝐫𝐮𝐥𝐞𝐬 𝐚𝐫𝐞 𝐡𝐞𝐫𝐞: 𝐟𝐚𝐢𝐫𝐧𝐞𝐬𝐬 𝐢𝐬 𝐧𝐨𝐰 𝐭𝐡𝐞 𝐥𝐚𝐰. From 1 October 2024, the Employment (Allocation of Tips) Act changes how tips, gratuities, and service charges must be handled across the UK. 👉 Key points for employers: 100% of qualifying tips must go to workers — no deductions allowed (except lawful ones like tax). Employers must adopt a fair, objective, and transparent allocation method. A written tipping policy is required where tips are common, and records must be kept. Agency staff are included in the same protections. This is more than compliance — it’s about building trust, transparency, and fairness in the workplace. 📌 If your business receives tips, now is the time to: Review your processes Draft your tipping policy Consult with staff Keep transparent records Fairness isn’t optional anymore — it’s the law. 𝐈𝐬 𝐲𝐨𝐮𝐫 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐫𝐞𝐚𝐝𝐲?

The U.S. Treasury and IRS have issued new guidance under the One Big Beautiful Bill identifying the occupations where workers are considered to “customarily and regularly” receive tips. This is an important development for businesses and employees in industries where tipping is a key part of compensation, as it provides clarity on how qualified tips will be treated for tax purposes. The guidance specifically lists a wide range of positions, including: • Bartenders and baristas • Casino dealers and gaming floor staff • Nail technicians and hair stylists • Valet attendants and parking lot employees • Food delivery drivers and restaurant servers …and many more roles where tipping is a routine part of income. Under the new rules, qualified tips include cash, credit card, or app-based payments, as well as voluntary tip pools—while mandatory service charges are excluded. This clarity will help both employers and employees accurately report and track tips, reduce compliance uncertainty, and prepare for the upcoming tax changes introduced by the OBBBA. In the mean time, Shana Tova umetka to those who celebrate! #IRS #TaxUpdate #OneBigBeautifulBill #Tipping #TaxCompliance #HospitalityIndustry #Accounting #TaxProfessionals

🚨 Restaurant Owners & Accountants – Are You Ready for IRS Form 8027? 🚨 If you run a restaurant, bar, or any food & beverage business where tipping is customary, Form 8027 is not optional—it’s mandatory! 📊 Filing this correctly ensures IRS compliance and helps avoid unnecessary audits and penalties. 🔍 Why does this matter? Many businesses underestimate tip reporting, leading to compliance headaches. Did you know? If reported tips are less than 8% of gross receipts, the IRS may require employers to allocate additional tips to employees—a rule defined under IRC § 6053(c). 💡 Before filing, ask yourself: ✅ Are cash and charge tips accurately tracked? ✅ Do reported tips meet IRS thresholds? ✅ Are employees properly reporting their tips? 📅 Deadline Alert: 🚀 Paper filing: February 28 💻 E-filing: March 31 📌 IRS Reference: Form 8027 Instructions 💬 Restaurant owners, managers, and accountants – what’s your biggest challenge with tip reporting? Let’s discuss in the comments! 👇 #RestaurantAccounting #Form8027 #TipCompliance #IRSRegulations #TaxSeason #SmallBusinessFinance

New and upcoming changes to employment in Ontario, are you ready? Employment Standards Act, 2000 Changes introduced by Bill 149 that are now in force: Individuals performing work during a trial period for the purpose of training fall under the definition of “employee” under the ESA and accordingly, are entitled to compensation for any trial periods. Employers are not permitted to withhold or deduct from an employee’s wages when a customer of a restaurant, gas station or other establishment leaves the establishment without paying for the goods or services taken from, consumed at, or received at the establishment. Changes introduced by Bill 149 that will take effect on June 21, 2024: Any alternate pay arrangement with respect to the payment of vacation pay (i.e., other than where an employer pays an employee vacation pay in a lump sum before an employee begins their vacation), must be “set out in an agreement” between the employee and the employer. Employers are required to pay tips or gratuities to employees in one of the following prescribed methods: cash, cheque payable only to the employee, direct deposit, or any other prescribed method of payment. If payment is made by cash or cheque, the employer must ensure that the payment is given to the employee at the workplace, or another place agreed to by the employee. If an employer has a tip-sharing policy in place, the employer is required to keep a copy of this policy in at least one conspicuous place in the employer’s establishment. The employer must also retain a copy of this policy for at least three years after the policy ceases to be in effect.