We Get It: Tip Skimming Is Different from Tip Sharing

We understand how some of you took exception to our Friday story, "After Batali Bust, Arguments for and Against Tipping Out." Though the news of a judgment in the class-action suit against Mario Batali and his partner, Joseph Bastianich, got us thinking about the practice of tip pooling, that's not what Batali and Bastianich did. Not even close.

Tipping out means taking a waiter's tips and redistributing them to other restaurant staff. Batali and Bastianich were skimming, tallying up wine sales nightly and then deducting a percentage of those sales from the tip pool, supposedly to pay for operating expenses like broken glasses and wine research (tasting trips to Italy maybe?).

Clearly, what Batali and Bastianich did is illegal in New York state, where tips can only go to front-of-house service staff. Management taking any part of the tips for any reason is forbidden. On the other hand, it is legal for servers to voluntarily pool tips with other service staff or for management to ask waiters to pay a certain percentage of their tips to bussers and bartenders (though servers have to distribute the tips themselves). In short, tip skimming by management is illegal; voluntary and even mandatory tip sharing among front-of-house service staff is fine under certain conditions. In retrospect, we should have noted that more clearly.

Now that that's settled, here's a summary of the two main comment threads on Friday's post:

Unlike other service workers, restaurant staff—and not just waiters—are paid small wages with the understanding that tips will make up the difference. Thus all restaurant staff deserve tips. Maybe so. Kind of lame on the restaurateur's part, though I know it's tradition. I also realize if restaurants pay staff more, food prices will go up. Would I rather pay more for food and scrap the tip system altogether? Dear God, yes.

The IRS assumes waiters are getting tips and taxes them accordingly. The same is not necessarily true of all staff who are tipped out. This is somewhat true, though the IRS doesn't add 8 percent to a waiter's reported sales and tax them on that total, a common misconception. That 8 percent figure comes from the fact that management reports tip income, and if servers are receiving tips that total less than 8 percent of sales, management has to pay them more. The IRS does require servers to report all of their tips, and in recent years the IRS has been pursuing waiters and bartenders more aggressively to prevent underreporting of income. The same may not be true for other tipped staffers, like cooks, hosts, and bussers.

Image source: Flickr member roger jones under Creative Commons