A Lawyer's Take on Tip Sharing

The Department of Labor recently issued a proposed rule that could change the way tips are shared among restaurant staff. We’ve partnered with attorney Sid Chary of Kalyan Law Firm, a boutique business law practice focused on the hospitality and creative industries, to explore the legal insights surrounding this issue. 


According to a recent New York Post article, a recent federal Department of Labor proposal could change how tips are shared among staff at service businesses like restaurants or bars in New York.  The Department of Labor (DOL) proposal would give restaurant owners flexibility in determining how tips left by customers are divvied out among restaurant staff, including restaurant workers like dishwashers or line cooks that would not typically receive tips under current DOL regulations. 

The DOL proposal would change a rule adopted by the Obama DOL that held that tips are the exclusive property of waiters.  The notice of proposed rule-making filed in the Federal Register by the DOL’s Wage and Hour Division on December 5, 2017 would allow tips to be shared with employees not currently entitled to share in tip pools through federal or state law.  For instance, under current New York law, tips can only be shared by non-managerial employees. 

In 2011, under the Obama administration, the DOL issued regulations that provided that tipped workers like workers, not restaurant owners or operators, owned the gratuities left by customers for purposes of the Fair Labor Standard Act.  In passing these regulations, the agency had essentially banned the practice commonly known as tip-pooling, in which all employees would receive a pro-rata portion of the tips left by restaurant customers over the course of the evening. 

In justifying the proposed change, the Trump administration stated that there was a growing disparity between the earnings of front-line restaurant workers like waiters and those in the back, like dishwashers or line cooks.  The proposal was intended to equalize that playing field by allowing restaurant owners and operators more flexibility in determining how tips are shared among both frontline and backline workers. 

The proposed rule generated more than 374,000 comments in the 30-day comment period under federal law after it was published in the Federal Register.  It is unclear whether the rule will be revised after the outpouring of public comments, but the rule will no doubt generate controversy regardless of whether the DOL revises it or not before issuing a final version of the rule.

Should you have any questions, please do not hesitate to contact Kalyan Law Firm to discuss your specific matter.

About Kalyan Law Firm: 

Harri is happy to announce that the Service First blog will now feature regular legal content from our partners at Kalyan Law Firm! We've partnered with attorneys at Kalyan Law Firm to bring you some great legal insights that will keep you in the know.  Kalyan Law Firm is a boutique business law firm focused on the hospitality and creative industries, and related practices.  With offices in New York City and Austin, TX, we offer extensive experience in a wide variety of transactional, corporate, and administrative matters.  This includes a comprehensive technical understanding of how to navigate various Federal and State regulatory agencies such as the U.S. Alcohol and Tobacco Trade and Tax Bureau, the Food and Drug Administration, and the New York State Liquor Authority and Texas Alcohol Beverage Commission; municipal agencies such as Depts. of Buildings, Health and Mental Hygiene and Consumer Affairs and the Board of Standards and Appeals; and local organizations such as community boards, block associations and neighborhood councils.  We offer a broad range of legal services for hospitality companies and entrepreneurs, breweries, wineries, distillers, importers, food and beverage manufacturers and retailers, physical cultural establishments such as gyms and yoga studios, as well as service providers to those industry members.   Additionally, we provide legal counsel to creatives such as musicians/songwriters, visual artists, filmmakers/actors/screenwriters, talent managers and production companies. Finally, our firm can help with any immigration needs and we handle employment visas, green card applications, and investment based visa petitions. For more information, check out the firm's website atwww.kalyanlawfirm.com and if you have any specific questions, please e-mail the firm at hello@kalyanlawfirm.com.  

Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Hari Nathan Kalyan, Esq. P.C. (dba “Kalyan Law Firm”) or its attorneys, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.