Is it legal in any state for an employer to take half of an employees tips? credit card tips?

Answer 1

I actually researched this question, which I rarely do, because I wanted you to have as clear an answer as possible.

I have never worked in an industry where there is tipping, but most of my friends have. I know from them that tips do not at any time belong to an employer, but that tip pooling is legal, and I wasn't sure about the legalities of it.

I found a page from the Department of Labor website, and I pasted three portions below which I think are most relevant to your question. I also posted the link to the page in the sources section, because I think you need to read the whole thing carefully.

Essentially, it is illegal for an employer to take ANY of an employee's tips. Tip pools are allowed, and that is explained below. Also, the law is very specific about credit card tips, and mandates what the employer can deduct, which basically amounts to the percentage they have to pay to the credit card company. Since that is a very small percentage, like under 3% max, an employer keeping half is clearly illegal.

You should know that as I was looking around on the internet, I found out that employers abusing tipping is rampant even if it is illegal. It is quite common, and takes many forms. If this is happening to you, you need to report it immediately. Look in your phone book and find the local office for the Department of Labor, and talk to someone there to see what you can do. If they are doing it to you, they are doing it to other people, and the only way to stop them is to stand up to them. I actually found out that there are law firms out there in some states that take tip abuse cases on a contingency basis.

Here are those sections from that article:

Retention of Tips: The law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. A tip is the sole property of the tipped employee. Where an employer does not strictly observe the tip credit provisions of the Act, no tip credit may be claimed and the employees are entitled to receive the full cash minimum wage, in addition to retaining tips they may\should have received.

Tip Pooling: The requirement that an employee must retain all tips does not preclude tip splitting or pooling arrangements among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), busboys/girls and service bartenders. Tipped employees may not be required to share their tips with employees who have not customarily and regularly participated in tip pooling arrangements, such as dishwashers, cooks, chefs, and janitors. Only those tips that are in excess of tips used for the tip credit may be taken for a pool. Tipped employees cannot be required to contribute a greater percentage of their tips than is customary and reasonable.

Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee's wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.

I would just like to add that I am very glad you posted this question. Because of my research, I am rethinking the way in which my husband and I will tip in the future. We always tip generously (20%+), but I may be asking people from now on if their employer uses the pooling system. I know that I have had fantastic service in places, but witnessed other people offering horrible service, and I don't like the idea that our great tip for a good server may be shared with the rude, inconsiderate person working the next station.

Good luck to you!

Answer 2

Tips are taxable too. The employer must report these earnings to the state as well.

Answer 3

NO NO NO that is considered STEALING & IS PUNISHABLE BY LAW!