What can I do if my employer keeps part of our tips?
The short answer
Example math
Say your house pools card tips and pays them out with your paycheck. One week the pool collects $1,200 (illustrative), and the house holds back $120 as a "house fee."
- Money that belongs to the pool: all $1,200. It can be shared only among eligible coworkers.
- Deadline: the full $1,200 has to be paid out no later than the regular payday for that week (or for the pay period that week ends in).
- The $120 held back: federal wage law bars an employer from keeping tips "for any purpose." That applies whether you earn $2.13 or $15 an hour.
- What the law says about unlawfully kept tips: an employer can be liable for the tips it kept, plus an equal amount on top, called liquidated damages.
Not tax or legal advice. The numbers are made up for the example. This page explains the federal rule; it can’t tell you whether your house broke it.
Check your estimate
Once your tip-outs are settled, estimate the federal deduction on the tips you actually kept and reported.
Open the calculator
Plain English
What counts as keeping
Federal wage law says your employer can’t keep any portion of employees’ tips, for any purpose, directly or through a tip pool. That includes making you hand tips to the employer, a manager, or a supervisor. It holds even if your employer pays you the full $7.25 or more and doesn’t count your tips toward your wage.
Sharing with eligible coworkers through a valid tip pool is allowed. The employer taking a cut is not. See Can my employer make me tip out or join a tip pool? and Can my manager or the owner take money from the tip pool?
Card fees are a narrow exception
DOL guidance says an employer can take the card company’s actual fee out of a card tip, and no more. See Can my employer take the credit card fee out of my tips?
Pool money has a deadline
If your employer collects tips and hands them back out, it must fully pay them out by the regular payday for that workweek. For pay periods longer than a week, the deadline is the regular payday for the period the workweek ends in.
What the law says an employer can owe
Federal law says an employer that unlawfully keeps tips can be liable for those tips, plus any tip credit it took, plus an equal amount as liquidated damages. The U.S. Department of Labor’s Wage and Hour Division takes complaints at 1-866-487-9243. DOL says complaints are confidential and that employers can’t retaliate against a worker for filing one. See How to file a complaint.
Your state may have stricter rules.
Common mistakes
- Thinking a full hourly wage lets the house take a share. It doesn’t.
- Treating a "house fee," "admin fee," or manager’s cut from the pool as normal.
- Assuming pool money can be held past the regular payday.
- Mixing up a card-fee deduction (limited to the actual fee) with a flat percentage the house picks.
Official sources
- U.S. Department of Labor, Fact Sheet #15: Tipped Employees Under the FLSA (employers may not keep tips; distributing tips from tip pools)dol.gov
- 29 U.S.C. 203(m)(2)(B)govinfo.gov
- 29 U.S.C. 216(b)govinfo.gov
- 29 CFR Part 531, Subpart D (531.52 and 531.54)ecfr.gov
- U.S. Department of Labor, Wage and Hour Division: How to File a Complaintdol.gov
Last verified:
Checked DOL Fact Sheet #15, 29 U.S.C. 203(m)(2)(B) and 216(b), 29 CFR 531.52 and 531.54, and DOL’s complaint page.