Restaurant and bar owners beware
Learn about the new rules of tip pooling
Employers in Colorado’s food and beverage industries are no doubt familiar with the current Colorado statutes concerning “tip pooling.” Under new federal guidance, effective November 23, 2021, that is about to change. But don’t stress too hard – tip pooling is still allowed; however, managers or supervisors will no longer be able to share in the tip pooling.
Generally speaking, the rules are quite simple: employers can require employees to share tips on a pre-determined basis as long as the employer lets the patrons know (in writing) that tips will be shared among employees. The statute, did not distinguish between employees who typically receive tips (such as servers or bartenders) and those who do not (such as managers or food preparers).
Effective January 1, 2021, the Colorado Department of Labor and Employment (CDLE) adopted a rule (COMPS Order #37) that defined a “tipped employee” as “any employee engaged in an occupation in which he/she customarily and regularly receives more than $30 per month in tips.” However, the definition explicitly stated that employers could require tip pooling with employees “who do not customarily and regularly receive tips, such as management or food preparers,” provided that those tips did not count towards the minimum wage requirement.
Under the new federal law, the difference is that managers and supervisors, despite being classified as “employees,” are now ineligible to participate in tip pooling. The new guidance does not specifically discuss food preparers or other non-managerial or non-supervisory positions, so it does appear that these types of employees are still allowed to participate in tip pooling arrangements. What is clear, however, is that tip sharing with managers or supervisors is expressly prohibited under the new rule.
To ensure compliance with best practices in Colorado, employers of tipped employees should follow the more stringent federal guidance. A willful violation of the federal rule can result in monetary penalties. Simply put, tip pooling among servers, bartenders, food preparers, and any non-management or non-supervisory position is permitted, and you should continue to follow Colorado statutes and rules concerning such arrangements. If your current arrangement includes supervisors and managers, please adjust your arrangement to exclude those employees as a best practice.
Vikrama S. Chandrashekar, Moye White LLP.