Who owns tips?

I own a restaurant. I pay all of my staff, including waiters, $8 or better. Are tips their property or mine?

Ann Kiernan replies:

The federal Department of Labor says that all tips belong to the employee. See DOL Fact Sheet 15. Employers cannot retain any tips paid to employees, except as part of a valid tip pooling arrangement. Tip pools may not include management or supervisory employees. The only deduction you can make from tips is to reimburse you for credit card fees. For example, if a credit card company charges 3 percent on all sales, you may pay the tipped employee 97 percent of the tips. Note that you must pay that amount on the regular payday, not when you get paid by the credit card company. 

Posted 01-29-2019

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.


About the Author:

Ann Kiernan has litigated claims of wrongful discharge and discrimination before state and federal courts and administrative matters before the New Jersey Division on Civil Rights, the National Labor Relations Board and the Equal Opportunity Employment Commission, representing both employers and employees. Ms. Kiernan co-hosted The Employee Rights Forum, a weekly radio call-in show reaching up to a half-million listeners in the New York metropolitan area, and her articles on employment law have been published in many books and magazines. Both as a firm partner and as a director, Ms. Kiernan gained solid experience in management and human resources compliance. She has worked with Fair Measures since 1997.