Tip pooling rules: what US employers commonly need to know

This is general information, not legal advice. Rules differ by state, city and country and change over time. Check the sources below and your state labor department, or ask an employment lawyer.

The federal baseline (FLSA)

• Tips belong to the employee. Under the Fair Labor Standards Act, employers — including managers and supervisors — may not keep any part of employees' tips, whether or not they take a tip credit.
• Tip credit pools: an employer that takes a tip credit may require a pool only among employees who customarily and regularly receive tips (servers, bartenders, bussers, runners, for example).
• No tip credit: an employer that pays at least the full minimum wage and takes no tip credit may include employees who aren't customarily tipped, such as cooks and dishwashers, in a mandatory pool.
• Managers may contribute to a pool but generally may not receive from it.
• Service charges (for example an automatic 20% for large parties) are generally not tips under federal law; how you distribute them is a separate question.
• Card fees: the US Department of Labor has said an employer may deduct the proportional card-processing fee from card tips, as long as the employee still gets at least minimum wage.

States are often stricter

Some states don't allow a tip credit at all, have their own rules on who can share, or require written notice of the pool. California, for example, generally bars employers and their agents from sharing in tips. Check your state.

Primary sources

• US DOL Fact Sheet #15: Tipped Employees Under the FLSA
• US DOL: Tips under the FLSA
• US DOL: Minimum wages for tipped employees by state

How Tiptrail helps

Managers (detected from job titles like “Manager” or “GM”) start at 0 points, and Tiptrail warns you if anyone with a manager-like title receives a share. Each role can contribute, receive, or both. Every share is traceable to its shift.

Last reviewed 2026-10-27. Software menus and labor rules change — confirm with the vendor's help center and your state labor department. Not legal or payroll advice.