Tip Pooling Rules for Kitchen Staff in the US (FLSA)

Japanese restaurants in the US face a tipping question that many other restaurants do not. The person the guest thanks is often the chef: the itamae behind the sushi counter, or the teppanyaki chef cooking at the table. Meanwhile the kitchen team in the back does work guests never see. How you share tips between them is governed by the federal Fair Labor Standards Act (FLSA), and the rules changed in 2018.

This guide covers the federal rules as the US Department of Labor (DOL) states them, checked in September 2026. State and city laws can be stricter, so read it alongside your state's rules.

1. The federal basics

• A tipped employee is one who customarily and regularly receives more than $30 a month in tips.
• An employer may pay a tipped employee a cash wage of at least $2.13 an hour and count tips toward the rest of the federal minimum wage of $7.25. This is the tip credit, worth up to $5.12 an hour. If tips do not make up the difference, the employer pays it.
• Tips belong to the employees. DOL states that the FLSA prohibits employers from keeping any portion of employees' tips for any purpose, whether directly or through a tip pool.

What changed in 2018

On 23 March 2018, Congress passed the Consolidated Appropriations Act, 2018, which amended section 3(m) of the FLSA. It barred employers from keeping employees' tips, including by allowing managers or supervisors to keep any portion, whether or not the employer takes a tip credit. DOL said at the time that employers who pay the full federal minimum wage may now allow workers such as cooks and dishwashers to take part in tip pools. The Act also gave DOL power to impose civil money penalties of up to $1,100 per violation (adjusted for inflation), on top of recovering the tips and an equal amount in liquidated damages. DOL's regulations were updated by a final rule published on 30 December 2020, partly withdrawn and revised on 24 September 2021.

2. Two models: tip credit or full minimum wage

The key point for kitchen staff: back of house can share in a mandatory tip pool only if you do not take a tip credit for anyone in it. If you pay servers $2.13 an hour and count their tips toward minimum wage, the pool must stay with occupations that customarily and regularly receive tips.

3. Where sushi and teppanyaki chefs fit

This is where Japanese restaurants differ. DOL's Wage and Hour Division concluded in opinion letter FLSA2008-18 (19 December 2008) that itamae-sushi chefs customarily and regularly receive tips. In opinion letter FLSA2025-03 (30 September 2025), about front-of-house oyster shuckers, DOL compared their work to that of "a front-of-house itamae-sushi chef or teppanyaki chef" and set out the test it applies: the employee must engage in service-related functions and have sufficient interaction with the customers who leave tips.

In practice:

• A sushi chef who works at the counter, presents dishes, explains the fish and talks with guests is likely to be treated as a tipped occupation, and can usually share in a Model A pool.
• A cook in the back kitchen who prepares food out of sight is not, and can share only under Model B.
• A chef who splits time between the counter and the back is harder. Keep clear rosters of who works where, and take advice before including them in a tip credit pool.

Opinion letters apply to the facts described in them. Use them as guidance, not as a guarantee for your restaurant.

4. Managers, owners and head chefs

Employers, managers and supervisors cannot receive tips from a pool under either model. DOL uses a duties test: a manager or supervisor is an employee whose primary duty is managing the enterprise or a recognised department, who customarily and regularly directs the work of at least two full-time employees or their equivalent, and who has authority to hire or fire, or whose recommendations on hiring and firing carry particular weight.

Many head chefs meet that test. An executive chef who runs the kitchen, directs several cooks and decides who is hired is very likely excluded from the pool, even if they spend the evening at the sushi counter. DOL's rule does allow a manager or supervisor to keep tips they receive directly from customers for service they directly provide. Owners who work the counter are in the same position as employers: they cannot take a share of the pool.

5. Service charges are not tips

DOL states that a compulsory charge for service, for example 15 percent of the bill, is not a tip under the FLSA. Sums paid to employees out of service charges are not tips, but they can be used to meet the employer's minimum wage and overtime obligations, and they count as part of the employee's pay when calculating the regular rate for overtime. Because the FLSA's tip pool limits apply to tips, a service charge gives you another way to reward back of house staff, subject to state law. Be clear with guests about what the charge is, and do not present it as a gratuity for staff if it is not. Some states regulate service charges; check yours.

6. Running the pool: fees, timing, records

• Card fees. DOL allows an employer to deduct from card tips only the actual percentage the card company charges on the transaction, and not if it would reduce the employee's wage below minimum wage.
• Timing. Tips must be paid out no later than the regular payday, or, where they cannot be processed in that payroll, as soon as practicable after it.
• Notice. If you take a tip credit, you must first inform tipped employees of specific information, including the cash wage and the amount of tip credit claimed.
• Written policy. Federal law does not require a written pool policy, but write one anyway: who is in, what share each role gets, how hours are counted, and how payouts are recorded. Translate it into Japanese for chefs who need it.
• Records. Keep daily tip totals and each person's share. They are your defence if a claim is made.

7. Choosing a model

Model A lowers your cash wage bill but keeps kitchen staff out of the pool. Model B costs more in base wages but lets you share tips across the whole team, which can help retain cooks in a market where the US Bureau of Labor Statistics puts the median restaurant cook wage at $37,390 a year (May 2025). If your state already requires full minimum wage for tipped staff, Model B costs you little extra.

For the full picture of what a Japanese chef will cost, see budgeting an international chef hire and US prevailing wage for chefs. If your front of house structure is still being planned, front of house hiring covers the roles.

General information, not legal advice. This guide covers federal rules only. State and local laws on tip credits, tip pools and service charges vary and may be stricter. Take advice from an employment lawyer in your state before setting up or changing a tip pool.