Taking from your employees' tip pool? It's illegal

It’s Dry January, and brewery owners are feeling the pinch. You might be tempted to supplement your income by dipping into your employees’ tip pool. That would be a huge mistake. It isn’t just bad form to take your employees’ hard-earned tips. It’s also illegal.

Under the FLSA, owners, managers, and supervisors are strictly forbidden from taking any part of pooled tips. There are no excuses.

So, who qualifies as a manager? According to this recent DOL opinion letter, the FLSA says it’s someone who:

• Supervises at least two full-time employees;

• Has the authority to hire and fire (or at least gets a serious say in it); and

• Spends most of their time managing the business or a department.

Even if they roll up their sleeves and do some of the same work as frontline employees, managers can’t take a cut of pooled tips. The only exception is for tips directly handed to them by a customer for work they personally did (and only they did).

When employers get this wrong the damages can be substantial. Employees can recover all misappropriated tips, back wages for sub-minimum-wage workers, and liquidated damages—doubling the amount owed, with a three-year look back. Add attorney’s fees and court costs, and suddenly that “extra income” turns into a very expensive mistake.

Moral of the story? Keep your hands out of the tip jar. Dry January is tough on breweries, but it’s no excuse to break the law.