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Daily Archives: June 15, 2009

Tipout pt. 1

As a new server, you might be wondering what this “tipout” thing is and why you have to pay money to your fellow employees.

First of all, what tipout is.

It’s a percentage of your sales or tips or  fixed amount given from a waiter to backwaiters/ buspersons, bartenders, hosts or anyone who contributes to the service of a guest by interacting with them directly (this is a key concept). It must be entered into by the entire staff and with their agreement.  

Second of all, what tipout isn’t.

It’s not a payment to your manager, chef, dishwasher or kitchen. It is forbidden, and backed up by court rulings, to require an employee to tipout anyone who doesn’t directly serve the guest. In the case of management, there are instances where a manager might conceivably be entitled to a tipout. Perhaps they work as a part-time bartender. But here’s the thing – if they perform managerial functions, such as hiring and firing or creating the schedule, they aren’t supposed to be allowed to require a tipout or even receive a tipshare. I’m sure that there are some conceivable exceptions to the rule – say an owner of a pub who is the primary bartender and who has a couple of waiters working for him or her, for instance. However, generally speaking, a manager isn’t supposed to strong-arm his or her service staff for tipshare of any kind (the guest, of course, is free to grease them as much as they’d like).

Kitchen workers aren’t allowed to participate in tipshare because they don’t directly serve the guest. This has been something that is common in the Pacific Northwest for some reason. Leaving out the pay differential and the “fairness issue”, if you are being forced to tipout the kitchen, it’s illegal. Except…

…many, if not most, servers don’t realize that there’s a legal distinction between a tip/gratuity and a service charge/autograt. Legally, an automatic service charge, as you might impose on a booked party, or an autograt that might be imposed on a party of 6 or more is technically not a tip. Tips are controlled by the server – a restaurant cannot take any portion of those tips for any reason, with the exception of requiring tipout as outlined above, or deduction for credit card fees (an increasingly common practice that’s not allowed in a few states, but allowed in most). However, service charges and autograts are controlled by the restaurant and they are considered to have full ownership of them. They can do whatever they want with them, even keep 100% if they so choose. In the case of autograts, virtually all restaurants simply treat them as tips. They don’t recognize any difference, mainly because it would be a real pain to separate the occasional autograt out. But in the case of a service charge for a booked party, it’s different. You’ll find some restaurants require a tipout to the kitchen and this is perfectly legal.

In the old days, hosts weren’t part of the tipout. This was considered a full-paying position. However, increasingly, restaurants have been cutting them in for a portion of the tips. This practice has been affirmed by the courts in the decision of the case Kilgore vs. Outback. You can read the decision here:

It was found that hosts and hostesses routinely interact with the guest and contribute directly to their service, thus fulfilling the main requirement of who can participate in a tip pool through tipout.

We’ll continue this topic later today or tomorrow as I’m in the middle of 4 days of closing shifts, today and tomorrow both being doubles and closing.