Restaurant tipping laws are evolving, and it's crucial that restaurant owners and managers follow these law changes carefully. With the changing of presidents in 2021, some changes have already been made to tipping laws that restaurant owners must comply with.

3 New Tipping Rules Transforming the Restaurant Industry

Tipping laws have changed in 2021, and these changes are transforming the restaurant industry. How do tips work in a restaurant now? Here's what you need to know.

rules for tipping

1. Tip Pools May Come Back

In the spring of 2021, the ban on tip pools was lifted. Employers are now permitted to have tip pools, but only if employees are paid the federal minimum wage of $7.25 per hour.

How do tip pools work?

Tip pooling is when all or a portion of all of the tips collected from customers are put into a pool. The pool is then redistributed to a larger group of employees (tipped and non-tipped workers). Tips are distributed as the restaurant sees fit, but the new law requires servers to be paid at least federal minimum wage.

One of the biggest challenges restaurants will face is figuring out how to calculate tip pools. There are many factors to consider, including

  • Which employees are working during each shift
  • How many hours each employee worked
  • Their positions (i.e., job responsibilities)

Tips may be distributed based on how many hours employees worked, or they may be based on a point system determined by the employee's position.

Points System

  • Each role is assigned a certain number of points. For example, servers may have 30 points and bussers may have five points.
  • The total number of tips is divided by the total number of points for the shift. Each staff member's points will be multiplied by this number.

Hours Worked

  • Tips are split based on how many hours are worked.
  • Divide the total number of tips by the number of total hours worked by your staff.
  • Multiply this figure by the hours each individual employee worked.

2. Employers Cannot Take Tips Meant for Employees

Tips are meant for employees, and the law prohibits the employer from taking tip credits that are meant for their workers. For example, managers and supervisors have a right to keep tips that are given by the customer directly to them.

However, aside from this one exception, the employer cannot take tips from employees.

Many changes surrounding this law have been implemented in recent years, but it's important to note that the current law allows up to $1,100 in fines for each violation of this rule. Previously, penalties only existed if the violation was willful or repeated.

Current laws do not allow for any variance from the rules.

tipping rules

3. Dual Job Rules, or the "80/20" Rule

Dual jobs rules are going into effect before the end of the year. The rules also called the "80/20" rule includes two different distinctions:

  1. Tip-producing work
  2. Work that produces tips

Tip-producing work is work that shouldn't take up more than 20% of the employee's time. Additionally, this work cannot take up more than 30 minutes of continuous time nor more than 20% of a person's total hours.

For example, let's assume that a waitress is responsible for brewing coffee and then bringing it to the table, this would be tip-producing work.

If an employee goes beyond the 80/20 rules, the employer must:

  • Not take a tip credit for the time this work takes
  • Must provide a full minimum wage, or higher to the employee

As an employer, it is your responsibility to ensure that your employees do not fall outside the dual job rules. If the employee is doing more than 20% of tip-producing work, they need to be compensated accordingly or the employer will be held liable for the issue.

What Consumers Must Know About Rules for Restaurant Tipping

As a consumer, there's little to know about how tips work in a restaurant. In the ideal world, the tips you hand off to waitstaff would be 100% their own. However, in recent years, tips pools and rule changes have led restaurants to try and offer "fair" tip rules.

Good and honest owners will make sure that their waitstaff is well-compensated with tips, but there are some that rather the tips enter their own pockets.

tips in restaurant

If you're a restaurant owner, making sure that you follow the rules for tipping is crucial because

  • Laws, such as those above, must be followed, or you risk being fined
  • Finding employees is difficult, and if tips in a restaurant aren't distributed properly, you can expect high employee turnover

Happy employees lead to better overall service and the ability to grow your business. In an industry that is known to thrive due to tipping at a restaurant, not following the laws for tipping could be very bad for business.

You can tarnish your entire restaurant's reputation if you don't follow tipping laws and regulations.

Adhering to the above changes and keeping on top of tipping law changes will lead to happier, healthier waitstaff.