So called “tip-pooling” is a rather common practice in Massachusetts whereby gratuities received from patrons are placed into a central pool for distribution amongst employees. While one might imagine that the particulars of such a practice would be left to the discretion of individual employers, tip-pooling is in fact subject to strict laws and in recent years has come under increased scrutiny from the courts.
Under the Massachusetts General Laws Chapter 149, section 152A, employers in Massachusetts may only implement tip-pooling where the proceeds are divided to the serving staff by proportion to the services given to the patron. Additionally, the law was amended in 2004 to declare that staff may not be required to share their tips with managers or kitchen staff and that it is unlawful for an employer to retaliate against employees for complaining about their tip-pooling policies. Further, the amendment made violations of the statute enforceable under the enhanced criminal penalty provisions, which include fines of up to $25,000 and jail time of up to two years, and set a three-year statute of limitations for private civil actions by employees.
Thus, while tip-pooling may at first glance have appeared to be a trivial issue, the failure to comply with the tip-pooling law can have dire consequences employers. For instance, a jury recently awarded former Hilltop Steak House employees $2.5 million in damages on account of the employer’s illegal tip-pooling. The employer was also found to have retaliated against the employees when they complained about such tip-pooling procedures. This case is just one of many, as 19 other tip-pooling cases have gone to trial in Massachusetts since the 2004 Amendments to the tip-pooling law, with approximately a dozen still pending. It is certain that this issue will continue on for quite some time, with even greater assessments of damages likely.
As such, it is crucial that employers be careful to ensure that their tip-pooling procedures remain in accordance with the law. Most notably, employers should avoid distributing gratuities to management staff, as the law clearly indicates that staff is not required to share their tips with managers or kitchen staff. Further, it should be emphasized that if complaints are received from employees, whether internally to management or as reported to an authority such as the Attorney General, employers take care to refrain from any act that could be deemed retaliation. With those procedures in place an employer stands a much greater chance of remaining free from becoming another defendant in the flood of tip-pooling litigation.