Tipping can be complicated, but it doesn’t have to be a legal minefield. Across the U.S., many lawsuits against restaurants and hospitality businesses stem from incorrect tipping practices, often due to misunderstandings rather than malicious intent. With evolving laws and regulations, staying compliant is more important than ever.
The good news? Most tipping mistakes are avoidable with the right policies, tools, and knowledge. In this guide, we’ll break down what you need to know to keep your tip pooling and tip sharing practices fully compliant while keeping your staff happy.
It’s important to understand that tip pooling and tip sharing are not the same:
Since the 2018 updates to the Fair Labor Standards Act, BOH employees can legally participate in tip pools, but only when minimum wage rules are followed and no tip credit is taken. Confusing tip sharing with tip pooling, or failing to follow these rules, remains one of the most common sources of legal disputes in restaurants.
Incorrect tipping practices can result in lawsuits, penalties, and strained employee relations. Compliance is essential not only for legal protection but also for fostering trust and transparency among staff.
Key points to remember:
A written policy is non-negotiable. It should clearly outline:
Make the policy easily accessible to staff and management. Modern tip management systems like TipHaus allow you to automate this process and ensure transparency for employees in real time.
Not all staff may participate in pooling or sharing. Clearly state who is included (e.g., servers, bartenders, hosts, BOH) and who is not. For tip sharing, reinforce that participation is voluntary.
Employees may wish to give extra tips to coworkers after exceptional teamwork or service. Policies should explicitly allow this without any pressure or coercion, ensuring compliance with labor laws.
Manual tip calculations are error-prone and risky. Automation ensures:
TipHaus integrates directly with your POS to make tip distribution seamless, accurate, and legally compliant, every shift, every time.
To stay compliant in 2025:
Running a restaurant comes with enough challenges, tracking tip distribution shouldn’t be one of them. With TipHaus reporting, you get full visibility into how tips are distributed, ensuring compliance, transparency, and data-backed decision-making that protects your business and empowers your team.
Watch one of our world-class support team members walk you through TipHaus reporting tools in action!
"We've experienced remarkable efficiency gains in managing our tip program. With TipHaus, our managers and team members save over 35 hours of manual labor per month at each location. This goes beyond streamlining operations. TipHaus has freed up our time by eliminating the need to secure cash for daily tip-outs, improved tip reconciliation accuracy, empowered us to boost team member retention through fair tip distribution and service charges, and reduced our compliance risks, cash handling costs, and labor expenses!"
— Jean-Pierre Mouren-Laurens, VP of Finance, Wood Ranch
Automated tip management isn’t just a convenience; it’s a risk reducer. TipHaus:
By implementing clear policies, educating your staff, and using automation, your restaurant can reduce legal risks, build staff trust, and create a smoother, more efficient tipping process.
Simplify tip management, protect your business, and empower your team. Start your free trial today!
