October 29, 2025
Pools and Credits: Tipped Employees in the Hospitality Industry
The U.S. Department of Labor (“DOL”) recently determined that a restaurant’s front-of-house oyster shuckers may be considered “tipped employees” under the federal Fair Labor Standards Act (“FLSA”). The DOL’s opinion was limited to the restaurant’s oyster shuckers, but sheds light on who may be a tipped employee in the hospitality industry.
For background, federal law (and the wage and hour laws of New York and New Jersey), allows eligible employers to apply some tips paid to tipped employees as a credit toward part of the minimum wage due to those employees. Federal law (and the laws of New York and New Jersey) also allows eligible employers to require tipped employees to combine their tips in a tip pool and redistribute the tips among all tipped employees.
What Makes Front-of-House Oyster Shuckers “Tipped Employees”?
The DOL noted that the front-of-house oyster shuckers interact directly with customers by:
- Explaining oyster offerings and making recommendations
- Answering questions about the different options
- Preparing oysters in view of customers
In this way, the front-of-house oyster shuckers are similar to sushi chefs and sommeliers, who interact directly with customers and receive tips from those customers, and are tipped employees. The DOL determined, therefore, that the restaurant’s front-of-house oyster shuckers also are tipped employees. The restaurant may take a tip credit against their pay, and may include front-of-house oyster shuckers in a traditional tip pool with servers and other tipped employees.
Distinguishing Front-of-House from Back-of-House Staff
Employees such as back-of-house oyster shuckers, whose workstation is in the restaurant’s kitchen and out of sight from the dining room and bar, are not employees who customarily and regularly receive tips because these employees lack sufficient interaction with customers who leave tips. Employers may not take tip credit for these individuals or pay them from traditional tip pools.
Broader Implications for the Hospitality Industry
The DOL’s guidance extends well beyond oyster bars. Hospitality employers should note that the critical factors in determining whether an employee is a tipped employee are:
- Sufficient interaction with customers
- Engagement in customer service functions
Any employee who regularly explains products or services, makes recommendations, or provides direct customer service, and regularly receives tips, could be eligible to participate in tip pools and be paid in part by tips.
Key Takeaways for Employers
- Include in traditional tip pools only those employees who customarily and regularly interact with customers and receive tips.
- Exclude from traditional tip pools back-of-house staff who lack meaningful customer interaction unless they consistently receive tips directly.
- Apply the tip credit only to tipped employees.
- Clearly define which employees are eligible to receive tips, document customer-facing responsibilities, and periodically review policies on tip pools and tip credit to ensure FLSA and state law compliance.
By understanding these distinctions and implementing clear policies, hospitality employers can comply with federal and state labor laws, distribute tips fairly, and reduce payroll costs through the appropriate use of the tip credit.
If you have questions about tip credits, tip pool or other wage and hour laws, please reach out to Chaim Book at cbook@booklawllp.com, Sheryl Galler at sgaller@booklawllp.com, Rebecca Nathanson at rnathanson@booklawllp.com or Jared Nossen at jnossen@booklawllp.com.
