Unique State Laws for Tip Pooling

Tip pooling has its fair share of guidelines and demands that are clearly outlined by the federal government to ensure tips distribution occurs fairly and as evenly as possible. In 2018, changes were made to the Consolidated Appropriations Act that allowed tip pooling whether or not employers claimed a tip credit. Additionally, employees are who tipped can be pooled with those who aren’t, adding a seemingly fairer balance to compensation. While most states rely on federal law to consolidate their tip allocation templates, there are certain states where municipal law takes greater precedence, making for stricter laws involving any form of tip distribution.

If you’re running a business in these states, you should consider the laws in question before using your tip pooling software and working out how to fairly distribute tips.

Tip Pooling in New York

Automatic tip sharing for employees is really up to managers and employers. Untipped employees in New York can only enter tip pooling if they regularly contribute to customer service as a part of their roles. This includes servers, hosts, and bartenders for restaurants as well as hotels. Employees involved in this practice are only required to contribute what they can afford, ensuring that whatever part of the cut they do keep helps them meet the minimum wage requirement. Tip distribution should only involve qualified staff, and management cannot take any cuts, as is common with tip pooling and similar tip allocation laws across the country.

Furthermore, New York has a higher tipped employee minimum rate than the federal rate. There’s also a lower minimum cash wage compared to the federal minimum—a factor to consider if you’re considering how to calculate tips. The use of your tip distribution software or tip sharing software should reflect these guidelines.

You Can’t Claim Tip Credits In California

Unlike most states, you cannot claim a tip credit in California as municipal law determines that tipped employees must be paid the state minimum wage of $10.50 or $11 an hour depending on how many employees the restaurant has on payroll before doing tip distribution.

According to tip pooling laws in the state, only restaurant employees deemed to be working in the chain of service can participate in a tip pool. This means servers, bartenders, and those responsible for direct service to customers can be involved. However, what’s most notable about California tip pooling laws is that pools are often redistributed in a way that respects the service that every employee provides to the customer. So, waiters and waitresses can claim as much as 80% during tip pooling, while only 5% goes to bartenders. This may seem like a huge disparity, but according to the California Department of Labor Standards Enforcement, this is perfectly legal.

How About in Texas?

In Texas, tip pooling is a bit more discretionary compared to most other states. What is sure is that in the Lonestar State, employers cannot force tipped employees to share their tips with employees who don’t involve themselves with guests in any way. This includes cooks, janitorial workers, and dishwashers, meaning no restaurant tip is automatic for all employees to claim. However, Texas-based employers can only require employees to contribute tips that exceed the amount that they make to meet state minimum wage requirements.

Tipped employees can work out how to fairly distribute tips with untipped employees, but cannot do so if tip credits are being claimed on them by the employer. Employers can take tip credits for time spent on non-tipped duties by employers who perform dual jobs, meaning they also worked tipped duties for a majority of their shift.

There Are No Specific Tip Pooling Laws in Illinois

One state where there are no specific tip pooling laws of any kind in place is Illinois. What employers mainly have to go off is the minimum wage requirements, which are higher than in most states. This affects how much in tips one employee can receive on top of their cash wages before contributing to tip pooling. State laws differ regarding whether the employer can pay the full minimum wage or count tips as part of the pay. While employers may introduce the tip management software, tips from any tip pool can’t go to anyone in a managerial role, including supervisors.

Tip pooling is strict in its administration, but some states are given more power than others to dictate how to fairly distribute tips. Other states don’t have any specific tip management laws, instead defaulting to minimum wage laws. For the best tip allocation strategy in your state, contact Tiphaus today for more!