Tipped Employees via Online Ordering

At the NHLRA, we work closely with the state to obtain clarity on how enforcement views a variety of issues pertaining to the hospitality industry. Below is the most recent guidance provided to us by the New Hampshire Department of Labor about enforcing tip sharing and pooling laws in regards to online ordering.

Can an employer choose to allocate tips to non-tipped employees via online ordering?

Any time an employer would like the ability to direct where monies should be allocated, a clearly identified service fee is the best option. Any time a monetary amount is allocated as a tip, the employer has lost all ownership. Employers who attempt to direct the allocation of tips run the risk of a wage claim allegation or a complaint that could result in an inspection regarding whether unlawful tip pooling or tip sharing practices exist. The service fee does not carry any of these risks.

What happens to a tip when an online order has no clear line of ownership of the tip?

If the business model does not have a clear line between server and customer, then the app/online interface or credit card line on the monitor should be treated akin to the tip jar on the counter. Before the tips are collected, a discussion occurs with the service staff to determine if they would like tips collected and how the service staff would like to distribute the tips. Coercion needs to be avoided so this discussion should make clear that the agreement is voluntary and if tips are desired to be accepted in this manner, the service staff should develop a reasonable method of distribution. 

How do I come to an agreement with staff members regarding tip sharing or pooling arrangement?

There is no law that requires these agreements to be reduced to writing, but doing so will help in case a wage claim or complaint is filed with the Department.  Reducing to a writing as well as having a written policy often avoids confusion as a written policy can be more reliably followed and facilitate employee understanding. This discussion should be revisited as new staff is acquired. There is nothing preventing an employee from opting out of the pool or share.

What are some common issues with this model?

The same issues that arise with a poorly communicated tip jar can occur with this model.

For example, a server who maintains a ledger of any dollar thrown into the virtual “jar” that can be connected to their work can file a wage claim. It does not mean they will prevail, but the allegation cannot be prevented. Adherence to best practices with tip pools and tip share assist employers in demonstrating compliance in instances where wage claims and/or inspections occur and even if the employer did not meet the requirements of the law, the good faith actions taken by the employer to mitigate violations can be reviewed to see if there was at least an attempt at following the law.

Have a compliance question?

Ask the NHLRA! We are here to help you get answers to pressing questions and understand complex issues pertaining to the hospitality industry.