Can My Boss Take My Tips? The Laws of Tip Ownership

November 13, 2023

If you work in the service industry in the United States, there are several reasons why you might be motivated to provide guests and customers with exceptional service. For some workers, the possibility of receiving monetary tips is an extra benefit of performing well. For other employees, receiving tips is a matter of meeting their living expenses.

You might wonder, “Can my boss take my tips?” The answer is not as straightforward as it might first appear. When it comes to tips that employees receive, the Fair Labor Standards Act (FLSA) is the primary law that comes into play and describes an employer’s obligations to pay their employees minimum wage and overtime.

What Does the Law Say About Employers Taking Tips?

The Fair Labor Standards Act, or “FLSA,” dates back to 1938. It has been amended and revised over the years to keep up with changing norms and to address contemporary needs. However, the law has always focused on employees’ rights to receive a fair wage and acts to limit what employers can do with their employees’ pay.

Employers generally have no rights or legal interest in their workers’ tips. If their workers earn more than the equivalent minimum wage through their tips, employers cannot move to limit or reduce their wages.

Both tipped and non-tipped workers must be paid the applicable minimum wage. If a tipped employee’s minimum wage and tips earned do not reach the minimum wage of a non-tipped employee, the FLSA requires the employer to make up the difference between these two figures.

Withholding Tips From Employees: Is It Illegal?

Generally, employees get to keep the full amount of tips they earn. Suppose that for one pay period, you earn $750 with tips. Your employer cannot reduce your pay because they feel you earned too much.

It would also be illegal if your employer took some of your tips through a tip pool. An employer or manager who receives a portion of the employees’ tips through a tip pool is illegally withholding their employees’ tips in violation of the FLSA.

Note that establishments that charge a mandatory “service fee” for services are permitted to keep that service fee.

For instance, suppose that your employer assesses a service fee of 20% on tickets for tables with more than eight guests. After you serve such a table, the guests pay for their meal and the service fee, but they do not leave you any separate tip.

In this case, your employer can keep the “service fee.” However, if your wages fall below the minimum wage, your employer must still make up the difference between your pay and the minimum wage equivalent. Such a payment may or may not come from the service fee your employer kept.

The Role of Managers in Tip Collection

The FLSA and other applicable laws have a rather limited role for managers regarding their employees’ tips: managers should keep their hands off them. Tips that employees receive belong to the employees and should remain with the employees.

Even tips that an employee earns that put them over minimum wage should be left alone by management. For example, in Florida, working an eight-hour shift at minimum wage as of September 30, 2023, will earn an employee $96.

Suppose you earn $150 between your wages and tips on a particularly good night. Your employer is not entitled to keep $54 from your tips.

Management can decide to set up and operate a tip pool if certain conditions are met. If they create a tip pool, managers should ensure each tipped employee still receives the equivalent minimum wage. Management, however, cannot legally participate in the tip pool.

Can Salaried Managers Collect Tips?

There is considerable confusion among employees over the question, “Can managers take tips if they work?” which is largely the result of employers who use a rather expansive definition of the position of “manager.”

These employers will assign employees with experience as managers and assistant managers over other employees while still requiring those “managers” to do the same work as the employees they supervise.

If the manager receives a tip for a service that the manager alone provides to a customer, then generally, that manager will be allowed to keep the tip. If any other employee assists the manager in any way, then any tip received belongs to the employee, not the manager.

Understanding Tip Pooling Laws

Perhaps your employer does not physically keep the tips you receive or allow managers to collect tips. Instead, your employer might direct that you and other tipped employees put all or a portion of your tips into a communal “pool.” All tipped employees then receive some tips from this common pot.

“Tip pooling” has advantages and disadvantages. On the one hand, if you are working but not receiving as many tips as your co-workers, the tips you would leave your shift with would reflect how busy and profitable the business was during your shift. Thus, the practice can benefit you on slow shifts or when your customers are reluctant to give large tips.

But not all employees are fans of tip pooling. If you are having a great night and receive a large number of tips from your customers, you may rightly feel that you have earned such tips.

As a result, you may feel that pooling and sharing your tips with other employees deprives you of the fruits of your labor and rewards employees who are not as industrious. While tip pooling is legal in Florida, it is subject to several requirements.

Most notably, managers and supervisors cannot participate in an employee tip pool.

Every employee who participates in the tip pool must still earn at least minimum wage, regardless of how the pool is divided. If your employer claims a tip credit, that tip credit may only be for the tips you get to keep, not the ones you earn.

For example, suppose you earned $90 in tips, but you only got to keep $30 after the money was distributed through the tip pool. Your employer can only claim a $30 credit toward your wages because the other $60 went to your co-workers.

Finally, employers must inform you of the tip pool before implementing it or having you participate in it.

Legal Recourse if Your Tips Are Taken or Withheld

It can be intimidating when your employer illegally takes your tips, and you may feel that you do not have any option other than simply accepting the situation. You have legal rights under the FLSA and perhaps other state and federal laws. However, it is up to you to exercise them and take advantage of these legal protections.

If you notice or believe your employer withholds your tips, speak with an attorney immediately. An experienced employment and labor law attorney can look at the facts of your case and determine whether a violation of the FLSA occurred.

Your attorney can also take swift action to preserve important evidence like your pay statements and receipts and depose witnesses with knowledge of your employer’s actions.

If your employer refuses to pay you what you owe, you can bring a legal complaint against your employer to recover the wages you should have received. You could also recover the cost of bringing your legal action. Additionally, employers who willfully or repeatedly violate the FLSA can be assessed up to a $1,000 penalty for each violation they commit.

Get Assistance From an Attorney

When you are not receiving the tips you earn or when you have questions about your pay, you should immediately reach out to the Florida employment law firm of Wenzel Fenton Cabassa P.A., who has over three decades of experience fighting on behalf of vulnerable workers.

Wenzel Fenton Cabassa P.A. helps employees get the justice they deserve. We are your knowledgeable advocates and advisors, using our familiarity with state and federal labor laws to safeguard your workplace rights.

Please Note: At the time this article was written, the information contained within it was current based on the prevailing law at the time. Laws and precedents are subject to change, so this information may not be up to date. Always speak with a law firm regarding any legal situation to get the most current information available.