Tip credits, tip pools, and slutty vegans

Bar Vegan in an affiliate of Slutty Vegan, a plant-based restaurant chain that finds itself in the crosshairs of a wage-and-hour collective action lawsuit challenging how it pays its tipped employees. The issue focuses on the bar claiming a tip credit and paying its tipped bartenders less than the statutory minimum wage. That practice, in and of itself, is legal. What makes it allegedly illegal in this case, however, is how Bar Vegan distributes tips among its staff, and more specifically that it permits non-tipped employees to participate in a tip pool with its tipped bartenders.

That's an FLSA no-no.

The FLSA permits employers to require tipped employees to "pool" their tips and share them with other eligible employees. The rules governing who may legally participate in a tip pool, however, depend on whether the employer pays its tipped employees a lower tipped minimum wage (a "traditional" tip pool) or the full statutory minimum wage (a "nontraditional" tip pool).

In a traditional tip pool — one in which tipped employees receive a lower tipped minimum wage — participation is limited to positions that customarily and regularly receive tips, such as waiters, counter servers, serving bartenders, and bussers.

In a nontraditional tip pool — one in which tipped employees are paid at least the full statutory minimum wage as their hourly wage exclusive of any tips — an employer may include positions that do not customarily and regularly receive tips, but instead directly support those that do. Examples of these tip-supporting positions that an employer can legally include in a nontraditional tip pool are cooks, dishwashers, and janitors.

In both traditional and nontraditional tip pools, neither supervisors, managers, nor owners may participate and receive tips from the pool. 

If you want to learn more about the legal ins and outs of tip credits and tip pools and you are attending the Craft Brewers Conference next month, then I recommend you check out my session — Tips on Tips: How to Legally Account for and Pay Tipped Wages to Your Taproom & Brewpub Employees — which takes place on May 9 from 1p - 2p. Also, keep an eye on this space on where you'll be able to meet up with me at CBC away from my speaking sessions.