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Tipping concepts

Tip Pool

Also called: tip pooling, tip sharing

A system where tipped workers contribute some or all of their tips into a shared pot that gets redistributed by a formula — legal under FLSA with strict conditions.

A tip pool combines tips from multiple workers and redistributes them by a predetermined formula. Pools come in two main flavors:

  • Traditional pool: only employees who customarily and regularly receive tips (servers, bartenders, bussers, runners). Legal in all states. Employer can use tip credit.
  • Non-traditional / kitchen pool: includes back-of-house staff like cooks and dishwashers. Legal under federal law only if the employer pays the full minimum wage (NO tip credit) to all participants.

Universal requirements under the FLSA (29 U.S.C. § 203(m)(2)(B)):

  • No manager or supervisor may take any portion of tips, even in a valid pool
  • Workers must keep all tips collected (minus valid pool contributions)
  • The pool can't reduce participants below the applicable minimum wage

States layer on additional rules. New York requires written notice to employees about the pool structure. California prohibits any tip pool where the employer takes a credit. Massachusetts has detailed rules on who can be required to participate.

Distinct from tip-out: a tip pool is a shared pot redistributed by formula; a tip-out is a one-way payment from a server to support staff.