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No-Tips For Your Workers? How to Make it Work Legally

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By Christopher Coble, Esq. on March 25, 2015 3:45 PM

What is the tip policy in your restaurant? Do your servers share tips with the busboys? Do you charge a set amount for parties of eight or more? Do you want to get rid of the headache of tips?

A growing number of restaurants are doing away with the concept of tipping completely. Bar Marco, an upscale Pittsburg restaurant, abolished their tip program opting to pay employees a base salary with health care benefits and stock shares instead. Brand 158, in California, adopted a no-tipping policy to discourage competition among employees. Servers at New York's Sushi Yasuda even run after customers to return tips. Are you considering implementing a no-tip policy for your restaurant?

What are some legal concerns of a no-tip policy you should worry about?

Paying a Higher Wage

Many states allow restaurant employers to pay a lower base wage to its tipped employees. For example, Massachusetts law allows employers to pay tipped employees (those who receive more than $20 a month in tips) as little as $3 per hour, much lower than the state's $9 minimum wage. This is called a tip credit. If an employee's tips and wages don't equal to at least $9 per hour, then the employer will have to make up the difference.

Restaurants that want to adopt a no-tipping policy can no longer rely on the tip credit to pay their employees below minimum wage. Employers will have to pay minimum wage or more, which can be as high as $15 in Seattle, Washington. This won't be anything new for all the restaurant owners in California, where tips cannot be counted toward minimum wage.

People Tip Anyway

Even though you can discourage customers from leaving tips, there's nothing stopping them from leaving some cash on the table anyway. However, don't be tempted to keep this for yourself just because you have a no-tipping policy. Tips, by law, belong to your employees.

So, how do you keep a no-tip policy if customers are still leaving them? A Washington, D.C. restaurant, Public Option, plans to give any money left on the tables to charity. Or, you could try to give the money back to the customers like at Sushi Yasuda. Regardless, you should get your employees invested in the no-tip program so that they aren't peeved to lose out on the extra cash.

If you do want to implement a no-tip policy, an experience local wage and hour attorney may be able to help you consider your options.

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