Wednesday, February 23, 2022

Tip credits and tip pools — the tip of the FLSA iceberg

No employment law is more misunderstood and misapplied by employers than the Fair Labor Standards Act, our federal wage and hour law. There are more than 8,000 federal FLSA lawsuits filed per year, with nearly one-quarter filed against employers in the accommodation and food service industry … including craft breweries. 

These employers get themselves in legal trouble because of the special manner in which service industry employees are compensated. If you employ workers who customarily and regularly receive more than $30 a month in tips (and every craft brewery does), there are two key FLSA phrases you must understand to avoid FLSA landmines — tip credit and tip pool.

A tip credit permits an employer to credit a designated portion of an employee's tips toward the employer's obligation to pay minimum wage.

A tip pool permits non-tipped employees to collect a portion of tips earned by tipped employees.

As with anything under the FLSA, these definitions are the tip of the FLSA iceberg. I explain the ins and outs of tip credits and tip pools in much greater detail over at, a website for which I am sharing my knowledge and experience to support the craft beer community.

The bottom line? If you are considering taking tip credits or implementing a tip pool, it is best first to consult with your friendly neighborhood craft beer employment lawyer. Compliance on the front end is always less painful and less expensive than litigation on the back end.