New Wage and Hour Opinion Offers Guidance about Pooling Tips of Restaurant Workers
A recent Wage and Hour Opinion Letter (no. FLAS2025-03) issued by the Department of Labor’s Wage and Hour Division (“WHD”) addresses whether a given category of restaurant workers (front-of-house oyster shuckers) can be among the employees who may be placed in a tip pool by their employer. Based on the fact that the shuckers regularly interacted with restaurant guests, WHD said yes because their work placed them among the cadres of restaurant workers that customarily receive tips.
Tip pooling involves the practice of having tipped employees turn over all or part of their tips to their employer, which then distributes the pooled tips to all of the tipped employees based, for example, on the employee’s hours worked and/or their roles. Employers may pay tipped employees an hourly wage less than the minimum wage and may count employee tips as a “credit” for minimum wage compliance purposes. However, the employer must ensure that each employee receives the minimum wage based on a combination of the employee’s hourly wage plus the tips earned by the employee.
If an employer that pools tips wishes to avail itself of a tip credit (in lieu of paying the full minimum wage), it can only pool the tips of the kinds of employees who customarily receive tips (e.g., servers, bartenders, and the like). It is this point that was the subject of the new opinion that was issued in response to a request for “an opinion whether an employer may include ‘front-of-house’ oyster shuckers in a restaurant’s tip pool with servers for whom the employer takes a tip credit under section 3(m)(2)(A) of the Fair Labor Standards Act (FLSA) 29 U.S.C. § 203(m)(2)(A).”
The scenario presented “a seafood restaurant that requires its servers to contribute tips to a tip pool that includes other service team members who do not receive tips directly from the restaurant’s customers.” The question was whether oyster shuckers could be among the other service team members in the tip pool. These employees shuck oysters at “an oyster bar at the restaurant’s bar” in the view of the restaurant’s guests including those seated in the restaurant. The shuckers do not, themselves, take the oyster orders—those are taken by bartenders and servers. That said, “the front-of-house oyster shuckers directly interact and engage with customers by sharing and detailing oyster offerings, making suggestions regarding the oyster offerings, and fielding other questions about the different options, while preparing the oysters for and in front of the customers.”
It is this level of customer interaction that was dispositive for WHD’s opinion that the oyster shuckers could be characterized as “employees who customarily and regularly receive a certain amount of tips” and, therefore, be included in the tip pool. The opinion analogized the shuckers to sommeliers that advise diners on wine selections, sushi chefs that prepare orders in front of customers, and counter persons who serve customers—all of whom have been categorized as tipped employees.
Notably, the opinion distinguished the front-of-house oyster shuckers from those who shuck oysters in the kitchen. The kitchen shuckers properly were not included in the tip pool because they did not interact with customers. However, as anyone familiar with food service should know, restaurant employees are often called upon to multi-task. Could it be that front-of-house shuckers work all or part of a shift in the kitchen or vice-versa? Methinks yes creating a situation that should be handled by employers with care if they wish to claim tip credits for employees whose work straddles the tipped/not-tipped line.
As I pointed out in a recent blog about a restaurant that didn’t keep good records, employers can’t take advantage of minimum wage and overtime exceptions unless they can prove they’re entitled to them. Therefore, this restaurant could lose its tip credit advantage if it always puts its oyster shuckers in the tip pool without any records that establish that they were working at the bar and not in the kitchen on a given occasion.
Finally, do bear in mind that the FLSA is a floor, not a ceiling. State and local laws and regulations often can require more.