Without good servers (servers that usually get good tips) a restaurant is screwed. Some restaurants will even fire servers that don't report enough tips.
This brings up another issue if a restaurant takes a server's tips and redistributes them back to the server and other employees then that tip money is income to the restaurant and the redistribution is ordinary income to the recipients. But wait, the employer does not pay the payroll tax on tips and the recipients are forced to do so. What's up with that.
And Charlie Trotter is VERY successful.
/john
The reason many businesses are controlling their employee's tips as if they are the business's property is because our federal government refuses to enforce the laws our country has enacted concerning tips. When a business takes a server's tips and redistributes them back to the server and other employees, that tip money is not income to the restaurant like some have suggested. It is instead stolen money which understandably no laws would address.
When employers steal their server's tips and redistribute them back to the server and other employees the tips must be treated as if they have not been stolen because there are no laws or guidelines addressing how stolen tips must be reported and taxed. Servers who receive tips are required by law to pay the taxes on them, so if an employer is intent on stealing part of the server's tips, the server must still pay the taxes on them.
Our laws state that tips are the sole property of the tipped employee. The question that has appeared to be a loophole in this simple law is, who exactly is the tipped employee. Businesses have been successful in getting judges to rule that anyone who receives a share of the tips customer's present is considered by law a tipped employee and as such employers may share the customers tip with anyone who is considered a tipped employee. The problem with such logic is that it errantly allows the business owner to determine who a tipped employee is when it is legally the right of the customer to determine who a tipped employee is. You see, that is why many businesses are mandating that their employees must pool tips. When mandatory tip pooling is allowed, please note that not every state allows employers to require tip pooling, instead of the customer determining who the tipped employee is, the businesses is allowed to determine who the tipped employee is. Who ever the business successfully includes in it's mandated tip pool is now considered a tipped employee according to a very suspect court ruling in the 6th circuit.
Federal laws state that a tipped employee is an employee who customarily and regularly receives at least $30 a month in tips. Because the US code has been revised so many times over the last 70 years, there is no mention left in the statute to address from who such tips must be received. It appears that at one time the US statutes must have included the fact that a tipped employee is an employee who customarily and regularly receives tips from customer's, for federal regulations clearly explain that a tip is a sum presented by a "customer" as a gift or gratuity in recognition of some service performed for him. CFR 531.52
Business owners, on the other hand, want to believe that a tip is a sum presented by a business who has a policy of tip pooling so that the business can determine who the tipped employee actually is. Why would businesses want to determine who the tipped employee is? Our government has passed a bill, the tip credit, which allows business owners an ability to pay tipped employees wages much lower than the federal minimum wage most businesses are required to pay their employees. Customers tend to be too selective in the eyes of business owners. Why should businesses settle for paying just their servers wages as low as $2.12 an hour when they could be paying all their employee's $2.12 an hour? A policy of employer required tip pooling allows businesses to redirect the customer's tips to as many employees as the business can in an effort to have these other workers considered tipped employees where the business will also be allowed to pay these workers wages as low as $2.13 an hour.
The reason I an going into such detail on this matter is because I am hopeful that this insight will eventually be realized by the US Department of Labor. It is their responsibility to interpret and enforce the labor laws of this country, however they have been utterly confused over the issue of who actually is a tipped employee. They have errantly attempted to compile a list of occupations that qualify as tipped employees, clearly missing sight of the fact that it is the customer's sole right to determine who a tipped employee actually is. Businesses have been unrelenting in their attempt to force the Department of Labor into overstepping their authority to the point of stripping our public of their constitutional right to determine for themselves who the tipped employee should be viewed as. As a result the Department of Labor is currently giving into the interests of business owners and allowing businesses to determine who the tipped employee actually is. As a result many employees who do not customarily and regularly receive tips from customers are being errantly considered tip employees all so the business can pay these non-tipped workers $2.13 an hour and profit from a ridiculous excuse of a loophole.
You see the presumed loophole is that since tips are legally defined as the property of the tipped employee, businesses can simply have the Department of Labor interpret that all the employees included in their tip pool scheme are tipped employees and thus the business is doing nothing illegal by simply distributing the tips to their rightful owner. Since tips are defined as the legal property of the tipped employee there can be nothing wrong with employers distributing the customer's tip to such tipped employees. An employer who mandates tip pooling is only distributing the money to it's rightful owner.
The problem with this presumption and the presumtion that there is a loophole in our laws that allows businesses an ability to legally steal tips from those employees who receive them from customers is that such presumptions ignore the constitutional rights of the customer. Customers have a constitutional right to liberty which in turn gives them the right to determine for themselves who should be viewed as a tipped employee and protected as the rightful owner of their tip. The Department of Labor's current position that the Department of Labor should be responsible for determining who the tipped employee is, is clearly in violation of our constitution for our constitution clearly states that no person shall be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
There has been no due process of law for the consumer's of this nation. There has been no justification even suggested for why the Department of labor is depriving the public of their constitutional liberty to determine for themselves who should be the recipient of their tips and legally entitled to such money. There has been no just compensation given the public for the seizure of their property, their tips. The Department of Labor has unconstitutionally deprived our citizens of their right to determine who will receive their tip by errantly insisting that it is the authority of the Department of Labor's to determine who is legally entitled to the customer's tip.
Let me reiterate. Federal regulation clearly state that tips are a sum presented by a "customer" as a gift or gratuity in recognition of some service performed for him. Tips are not a sum presented by authority of the Department of Labor. The Department of Labor has no authority to determine who businesses can give stolen tips to. Tips are the sole property of the person to whom the customer has given it. Tips do not belong to the Department of Labor that they should determine who is legally entitled to them. It is the customer's constitutional right to determine for himelf who the tipped employee is and who is legally entitled to his tip. The Department of Labor is hereby exposed as a openly corrupt department of our governemnt which is blatantly overstepping it's authority in an effort to aid and abet business owners in stealing their employee's tips.