What is tip pooling in a restaurant?
Tip pooling is when a restaurant combines tips earned during a shift/day into one pool and redistributes them using a set formula (points, percentages, or role-based rules).
Restaurant Tip Pooling Law in 2026
Overview
Tip pooling is when a restaurant collects tips earned by tipped employees during a shift or day, combines them into one pool, and then redistributes them using a set formula (for example. points, percentages, or role-based tip-outs). The goal is to share tips across the service team in a consistent, predictable way - so the same rules apply every shift, not just when someone feels generous.
A tip pool usually includes only tips left by guests (cash tips and credit card tips). It should also be supported by a written policy that explains - who participates, how the pool is calculated, how often tips are paid out, and how disputes are handled. In 2026, the biggest compliance mistakes still happen when the policy exists, but day-to-day practice doesn't match it.
When tip pooling is done right, it's simple - clear rules, eligible roles, consistent math, and clean records.
What Actually Changed in 2026
For most restaurant owners, "tip pooling law changes in 2026" isn't one single nationwide reset - it's a mix of (1) state/local updates, (2) stronger enforcement, and (3) ongoing federal guardrails you still have to follow.
What stayed the same (the non-negotiables)
1. Employers can't keep employees' tips under any circumstances, and managers/supervisors can't keep tips (including through a tip pool). That federal principle continues to be a core enforcement trigger.
2. Tip pooling still has to be run as a clear policy + consistent practice- eligible roles, a defined method (points/percentages), and clean records.
What changed in 2026 (where restaurants are feeling it)
1. California - stronger tip-theft protections and penalties. A major 2026-effective update strengthened protections around gratuities and adds civil penalties tied to tip violations, increasing the cost of "small" mistakes.
2. California - credit-card tips must be remitted in full (no card-fee deductions). New requirements emphasize that if the guest pays a gratuity by card, the business must remit the full gratuity amount without deducting processing fees.
3. Local transparency proposals are gaining traction. New York City introduced legislation in 2026 that would require more detailed disclosures to tipped workers (including tip-pool totals and cashless tip amounts) and add new remedies - this is a signal of where enforcement expectations are heading even before policies fully change.
If you haven't reviewed tip handling since last year, treat 2026 as a policy refresh moment- confirm who is eligible, confirm no manager/supervisor touches pooled tips, and double-check state/local rules (especially around credit-card tips, deductions, and required disclosures).
Who Can (and Can't) Participate
The most important tip pooling rule in 2026 is this - who can be in the pool depends on (1) the role and (2) your state rules - and it can also change if you take a tip credit. Many compliance issues don't come from the math of the pool; they come from including the wrong job titles (or letting the wrong people touch the money).
At the federal level, a "traditional" tip pool is generally limited to employees who customarily and regularly receive tips - think front-of-house roles that guests actually tip as part of normal service. In restaurants, that usually includes positions like servers, bartenders, bussers, service bartenders, and some counter personnel who directly serve customers. The key idea is consistent guest tipping as part of the job, not "they help out sometimes."
Where owners get stuck is with support and hybrid roles. Roles like hosts, food runners, and expos can be treated differently depending on how your restaurant operates and how your jurisdiction defines "tipped" participation. If a role is routinely tipped by guests (directly or through established tip-out practices), it may fit. If the role is primarily non-tipped and only occasionally receives tips, including it can raise risk - especially when you're using a tip credit.
Back-of-house participation is the biggest "it depends" area. Under federal law, BOH inclusion may be permissible in certain setups (particularly when no tip credit is taken), but many states restrict tip pools to the "chain of service" and/or limit which roles can participate. That's why you should never copy a tip pool model from another state without checking the local rule set.
Finally, one line should be in bold in your policy- Managers and supervisors cannot receive tips from a tip pool. If a manager is helping on the floor, the safest practice is to keep them out of pooled distributions entirely and tighten access controls in POS/payroll so the policy can't be bypassed.
Managers and Supervisors
If there's one tip pooling mistake that creates the fastest legal exposure in 2026, it's this - a manager or supervisor receiving tips (directly or indirectly) from a tip pool. Many restaurants don't intend to break the rules - they just have "working managers" who jump behind the bar, run food, or cover a section during short-staffed shifts. The problem is that helping with service doesn't automatically make someone eligible to share in tips.
Under federal rules, managers and supervisors generally cannot keep tips and cannot participate in tip pools, even if they spend part of the shift doing tipped work. The law looks beyond job titles and focuses on actual duties and authority - for example, whether the person regularly directs other employees, has meaningful input on hiring/firing, or is responsible for scheduling and discipline. That means a "shift lead" or "assistant manager" may still be treated as a supervisor depending on what they do, not what their name badge says.
This is why "we only let them take tips when they serve tables" is a risky policy. Even if it feels fair internally, it's hard to defend if the person is a manager in practice. The safer approach is to keep a bright line- managers/supervisors do not receive pooled tips. If they perform tipped work, treat it as part of their management role and compensate through wages - not the tip pool.
What to do now (practical controls that hold up in real life) -
1. Write it clearly - "Managers and supervisors may not receive tips from tip pools."
2. Lock down POS access - prevent managers from being assigned to tipped job codes or included in tip distribution reports.
3. Separate coverage plans - when a manager must cover, have a predefined alternative (e.g., reassign tables to eligible tipped staff; use an on-call list).
4. Audit weekly - spot-check tip pool reports for ineligible names and fix immediately (including retro pay corrections if needed).
5. Train on gray areas - shift leads, key holders, and "working managers" are where mistakes happen - teach what crosses the line.
Tip Credit and Tip Pooling in 2026
If your restaurant takes a tip credit (where your state allows it), tip pooling becomes higher-risk - because the law treats tips as part of how you meet minimum wage requirements. In practical terms, that means your eligibility rules tighten, your documentation needs to be cleaner, and small operational habits (like side work assignments) can create bigger compliance problems than owners expect.
First, when you use a tip credit, your tip pool is generally limited to employees who are customarily and regularly tipped. That usually means a traditional front-of-house group (like servers and bartenders) and certain support roles that guests routinely tip as part of the service model. The more you stretch the pool to include roles that aren't consistently tipped, the more exposed you become - especially if you can't clearly show why those roles qualify under the applicable rules.
Second, tip credit restaurants need to pay close attention to non-tipped work and side work. Even if your tip pool is set up correctly, you can run into trouble if tipped employees spend too much time on tasks that aren't part of tip-producing service (prep, cleaning, stocking, rolling silverware, etc.) without proper tracking and pay treatment. In 2026, the operational fix is straightforward- define side work, set limits, track it consistently, and don't rely on everyone just helps as your compliance strategy.
Third, tip credit changes how you should think about timing and transparency. You want your policy to state (clearly) how tips are collected, how they're calculated, when they're distributed, and how corrections are handled. If you're paying tips through payroll, your POS and payroll systems should match the policy exactly - because inconsistent reports are a common trigger for disputes.
What to do now -
- Confirm whether your state allows a tip credit and what rules apply.
- Tighten eligibility, keep the pool limited to clearly tipped roles.
- Define and track side work so tipped time vs non-tipped time isn't guesswork.
- Make the policy match the POS/payroll workflow (same math, same schedule, same roles).
- Run monthly audits, tip pool participants, tip credit usage, and side-work assignments.
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Tip Deductions, Processing Fees, and Pay Timing
Even when your tip pool is set up correctly, restaurants still get into trouble in three places - (1) deductions, (2) credit-card tip handling, and (3) when and how tips are paid out. In 2026, the safest approach is to treat tips as employee-owned money that you're administering - not revenue you can "net down" to cover costs.
Deductions
A common mistake is using tips (or pooled tips) to cover business losses or expenses. As a rule, avoid deductions tied to operating costs, including cash drawer shortages, walkouts, breakage, uniforms, tools, or admin fees. Even when something feels "fair," deductions from tips can create wage and tip-theft claims fast - especially if they push the employee's pay below required minimums or violate state rules.
Credit-card processing fees
In some places, limited credit-card fee deductions may be allowed under federal standards (typically capped at the actual processing fee), but state law may be stricter. California is a clear example - guidance has long indicated that the employee must receive the full tip amount shown on the credit-card slip, and SB 648 reinforces that requirement effective January 1, 2026. If you operate in multiple states, don't assume one rule applies everywhere - this is a location-by-location compliance item.
Pay timing and transparency
Your policy should state when tips are distributed (end of shift, next day, weekly, each payroll, etc.) and your systems should match. If tips are paid through payroll, your POS and payroll exports should show gross tips collected, tip pool math, participants, and net paid. The easiest way to reduce disputes is to give employees a simple breakdown they can understand and verify.
What to do now -
1. Write a "no deductions from tips" rule unless explicitly allowed by your state counsel.
2. Confirm credit-card tip handling rules per state (especially CA).
3. Standardize payout timing and require a clear tip report every period.
4. Audit tip adjustments, voids, and refunds so they don't unintentionally reduce employee tips.
State and Local Tip Pooling Traps
The biggest tip pooling compliance mistake in 2026 is assuming there's a single set of rules. In reality, federal law sets a baseline, but state and local laws can be stricter - and those stricter rules are where most restaurant tip disputes come from. If you operate in multiple jurisdictions (or even near city boundaries), you need a process that treats tip pooling as location-specific compliance, not a one-size-fits-all policy.
Trap 1. Different definitions of who can participate
Some states follow the "customarily and regularly tipped" framework closely. Others are stricter and may limit tip pools to certain front-of-house roles or "chain of service" positions. That means a role like host, expo, or food runner might be acceptable in one place and problematic in another - especially if your documentation can't show the role is consistently tipped in practice.
Trap 2. Local rules that add disclosure or recordkeeping requirements
Even where tip pooling is allowed, some jurisdictions are moving toward more transparency expectations - clearer tip pool formulas, clearer pay-stub reporting, and clearer breakdowns of tip allocations (especially for credit-card tips and pooled tips). If your current workflow relies on trust us, it balances out, you're more exposed than you think.
Trap 3. Credit-card tip handling is not uniform
As mentioned earlier, some states (notably California) have stricter requirements around remitting the full amount of credit-card tips, which can eliminate practices that might be tolerated elsewhere. Multi-state operators get in trouble when the finance team applies a single net tip approach across all locations.
Trap 4. Service charges and "fees" that look like tips
Auto-gratuities, delivery fees, and other mandatory charges may be treated as restaurant revenue in many jurisdictions - not tips. Mislabeling them as tips (or pooling them as if they were tips) can create wage, tax, and notice problems.
What to do now
Build a simple tip pooling compliance matrix by location- who can be included, whether tip credit is allowed, credit-card tip rules, service-charge treatment, and required disclosures. Then require each store to follow the version that matches its jurisdiction.
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Must-Read Content
Minimum wage
2026 Restaurant Minimum Wage Guide
Scheduling rules
2026 Restaurant Scheduling Rules Update
Labor compliance
Labor Compliance for Restaurants
Frequently Asked Questions
How do tip pooling rules change if my restaurant takes a tip credit?
They usually get stricter. Eligibility is typically limited to clearly tipped roles, and side work/non-tipped work tracking becomes more important.
Are service charges the same as tips?
Usually not. Mandatory fees (auto-grat, service fees, delivery fees) may be treated as restaurant revenue and handled differently for wage/tax purposes.
Who is usually allowed in a restaurant tip pool?
Typically, employees who customarily and regularly receive tips - often servers and bartenders, and sometimes support roles depending on how the role functions and local rules.
What's the difference between tip pooling and tip-out?
Tip pooling is a shared system that applies broadly and consistently. Tip-out is usually a direct transfer from one role to another (e.g., servers tip out bartenders).
