Labor and Industry recovers $70K in back wages for workers required to pool, distribute earned tips

Following two recent labor standards investigations by the Minnesota Department of Labor and Industry (DLI), a restaurant in Excelsior, Minnesota, has agreed to pay $55,120 and a restaurant in Detroit Lakes, Minnesota, has agreed to pay $14,695 in cases involving workers who contributed to illegal tip pools.

The first investigation found Yumi Excelsior LLC required workers to contribute their tips to a fund that was later distributed to other employees in 2018 and 2019. Yumi agreed to resolve the matter and pay back impacted workers. Back wage amounts ranged from $281 to more than $16,000 in payments to 10 workers.

The second investigation found that in 2018 and 2019, TBCT Management LLC (doing business as Spitfire Bar & Grill) required workers to contribute tips to a fund that was distributed to other employees. TBCT agreed to resolve the matter and pay back 52 employees who each received an average of $282 in back wages.

“We want to remind employers that earned tips are the sole property of the direct service employee or an employee who performs direct service for a customer,” said Roslyn Robertson, DLI commissioner. “Under state law, employers cannot require them to share tips with other employees.”

Tip pooling in Minnesota

Minnesota law prohibits employers from requiring employees to share their gratuities with their employer. Employers cannot require employees to share their tips with indirect-service employees (employees who do not directly receive tips, such as bussers, dishwashers, cooks and hosts).

Tip sharing is allowed when employees earning tips opt to share their tips with their coworkers independent of their employer. It is also is permitted when more than one direct-service employee provides direct service to a customer in a situation such as a banquet. Money presented by customers as a gratuity and divided among these direct-service employees is not a violation of Minnesota tip laws.

Employers cannot have any involvement in tip sharing, other than reporting the amounts received for tax purposes and posting a copy of the law about tip sharing for employee information.

View more information about tip pooling on DLI’s website.

Learn more about Minnesota employment laws

DLIʼs Labor Standards helps employers and employees comply with the stateʼs wage, hour and employment laws. Contact Labor Standards with questions or to report violations at 651-284-5075 or dli.laborstandards@state.mn.us.

Employers are encouraged to sign up for DLI’s Minnesota Wage and Hour Bulletin email newsletter. Subscribers receive periodic messages about state wage and hour laws enforced by DLI’s Labor Standards.