So You Want To Be A Waiter

The best book on waiting tables that you have never read – yet

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.

4 responses to “Tipout pt. 1

  1. waiterextraordinaire June 15, 2009 at 9:36 am

    Maybe some restaurants should read on the kitchen payout from the tip pool. I have worked in some restaurants that require you to tip out to the kitchen. In one small place the chef was demanding it in order to stay.The waiters are getting saddled more and more forking out money to make up for lower salary offered by management in a lot of places to minimize salary expense.

    • Frances Rippringham September 20, 2009 at 6:09 pm

      I work at an Indian Restaurant and am required to tip the kitchen 50% of my tips!! Only to find out that the kitchen doesn’t receive any special bonuses at the end of the month like the owners say. As a matter of fact, they all get paid the SAME AMOUNT of money every month, as we all only get paid once a month.
      The main cook told me the owners just pocket it. I read that it is completely illegal for the kitchen and not to mention the owners to accept a waitress tips. I’m boggled on what to do because I love my job and the love the people I work with, but it’s not fair that half my tips go to the owners! I want to just not divide it into half and wait until the owners say something then tell them I found out it’s illegal what their doing. Any advise?

  2. teleburst September 21, 2009 at 7:10 am


    I can’t give you a definitive answer because it depends on where you are from.

    If you are in Oregon, then yes, it’s legal to require a kitchen tipout. California seems to be going that way as well with a recent court ruling.

    I discuss this recent California court decision here:

    There is some extra commentary in the comments section.

    In the states that allow a tip credit – i.e. states that pay below minimum wage, I would think that the federal law that disallows this behavior would take precedence, because the the very fact that Oregon and California pay above minimum wage seems to keeps them from being subject to the provisions in federal law that regulate this.

    I can’t speak for countries other than the US. And, I’m not a lawyer either. I understand that this isn’t a rare occurance in Indian restaurants (I’ve heard a similar complaint in other forums). You might want to contact your local labor board or legal aid and get an opinion because they might be violating other regulations as well. For instance, in California, they can’t hold your credit card tips for more than a day or two.

    One other thing – if they are adding on a mandatory service charge or autograt, they can do anything they want. Neither is considered tips and they are considered the property of the establishment, unlike tips, which are considered the sole property of the waiter, with the exception of tipping out (must be “reasonable and customary”) and deducting for the credit card processing fee.

    Keep us posted.

  3. Pingback: Article on tipping out from The Orlando Sentinel « So You Want To Be A Waiter

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