Counter Tips

Any sufficiently advanced technology is indistinguishable from magic.


Update April 2018

The Trump administration made sweeping changes in the budget passed in April, 2018. Even further changes were discussed during the budget debate. President Trump initially chose Adam Puzder, President of Carl's Jr./Hardees as Secretary of Labor. Let's assume for a minute that someone with more than 10,000 minimum wage workers is not a fan of raising the minimum wage or, in general, pro employee. One of the budget discussions was expanding the rules on tip pooling. Under these proposals, it would be possible, and legal for an employer to keep all tips and pay servers minimum wage. That did not become law. But there were some changes in the tip pooling laws. The updated for 2018 document is here.


It started with the tip jars. I can almost see a tip jar at a coffee shop where orders are customized to each customer and can get quite complicated. But tip jars proliferated. I see them as Subway where dropping pre-packed meat on bread might not happen correctly.

Most counter workers are paid at least minimum wage. This separates them from tipped employees. Tipped employees can be paid as little as $2.13 an hour. Amazing. While discussing should the minimum wage be $7.70, $10.00, or $15.00 an hour, the person who brought you breakfast at IHOP is making $2.12 and hour. The reasoning is pretty simple, if you are in upper management at some place like Red Lobster, TGI Fridays, the National Restaurant Association or one of their "concerned" legislators. If you paid a tipped employee minimum wage, they would make too much money. Stand in front of a mirror and say this out loud. "If I were paid minimum wage, I would make too much money."

I am not talking about the $2.3 million paid to a middle of the road back up short stop. I am not talking about the bonus paid to a bank executive whose bank needed Federal bailout money. I am not even talking about a below average doctor having to make do with a three year old BMW. I am talking about someone whose employer and both the federal and state government think are not worth $5,000 a year.

But back to the tip jar or "counter tips."

The Fair Labor Standards Act really makes it quite clear. If you make more than $30 a month in tips, tips are the property of the employee.

Tips are the property of the employee.

This would include employees involved in a tip pool. There are sit down restaurants who use tip pools. A tip pool is completely legal provided:

  • It is a written agreement.
  • The members of the pool customarily receive tips.
  • Does not include employees who do not customarily receive tips.
  •  NEW for 2018 - Can include employees who do not customarily receive tips if all employees receive minimum wage.
  • Never includes the employer.

Owners and managers should never have their hands in the tip jar or counter tips. Putting counter tips in the till to "balance out the drawer" is the same as taking the tips.  Owners/managers in the tips is illegal and actionable. Contact your state's department of labor or a google labor lawyer your state. The federal maximum fine is $1,000 per incident. Tell your managers to keep their hands off the tips. The Department of Labor will be happy to do this for you.

US Department of Labor Field Service Bulletins.

All of this is covered in Fair Labor Standards Act Fact sheet #15. See the revised rules for 2018.