Question:
We have to tip out 2.5% of our sales to the back of house. Is that legal?
– Jayme Mortenson, Server, IHOP, Oregon City, OR
Answer:
In most states, sharing the tip pool with the back of house at all is not legal. The US Wage and Hour division, under the Fair Labor Standards Act (FLSA) says, “A valid tip pool may not include employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs and janitors.”
However, you are writing from Oregon, which is a different story. Because Oregon does not allow the tip credit, meaning tipped and non-tipped employees are all held to the same state minimum wage (currently $9.25), the 9th Circuit Court famously allowed tip pooling to include back of house employees. The key distinction here is that no tip credit is taken and all employees receive at least minimum wage before any tip distribution. The decision is not final so may change, but for now the practice at your restaurant is allowable.
The best way to have clarity on this topic is for house tipping policies to be clearly outlined at the outset of employment. Since laws vary by state (for example, California has some additional tip pooling restrictions), be sure to check with your state restaurant association.
More on tip pooling here.