Run: Tip Pooling Policy

This policy establishes the rules for collecting, pooling, distributing, reporting, and auditing tips in a manner that complies with the Fair Labor Standards Act (FLSA), applicable IRS reporting requirements, and any applicable state or local wage-and-hour laws.

This policy applies to all employees in tipped positions and to managers, supervisors, payroll, and HR personnel involved in tip collection, distribution, reporting, or auditing. **California employees:** tip ownership and tip-pooling rules must be reviewed for compliance with California Labor Code requirements and any applicable case law. **All jurisdictions:** if state or local law is more protective than this policy, the more protective rule controls.

For purposes of this policy, the following terms apply: - **Tip:** A voluntary amount left by a customer for service. - **Tip pool:** A shared distribution arrangement for tips among eligible employees. - **Eligible employee:** An employee who may lawfully participate in the tip pool under the FLSA and applicable law. - **Manager or supervisor:** An employee with authority over hiring, firing, discipline, scheduling, or directing work who is excluded from receiving pooled tips. - **Tip credit:** A wage credit allowed under the FLSA only when all legal requirements are met. - **Documented warning:** A written notice used when an employee violates this policy.

The company will maintain a tip pooling and distribution process that is fair, transparent, and compliant with the FLSA. Tips are the property of eligible employees except to the extent a lawful tip pool is used. Managers and supervisors are prohibited from keeping any portion of employee tips, whether directly or indirectly. The company will not require employees to share tips with individuals who are not eligible under applicable law. Any use of a tip credit will be administered only when permitted by law and only after employees receive the required notice.

1. **Collection of tips:** Tips received in cash, by credit card, or through digital payment methods must be recorded according to payroll procedures. 2. **Tip pool eligibility:** Only employees in eligible tipped or service roles approved by HR and Payroll may participate in the pool. Managers and supervisors are excluded. 3. **Distribution method:** Tips will be distributed using a documented formula based on hours worked, points, or another lawful method approved by HR and Payroll. The formula must be applied consistently. 4. **Shift closeout:** Employees must submit tip declarations and any required shift reports by the end of each shift or payroll cutoff. 5. **Payroll reporting:** Reported tips will be included in payroll records and, where required, on employee Forms W-2 and other tax filings. 6. **Record retention:** Tip records, distribution logs, and audit results must be retained according to company retention schedules and applicable law. 7. **Audit process:** HR, Payroll, or Internal Audit may review tip records periodically to verify accuracy, detect errors, and confirm compliance. 8. **Corrections:** If an error is identified, Payroll will correct the distribution or reporting as soon as practicable and document the correction.

**Employees:** Accurately report tips, follow tip-pool rules, and promptly raise concerns about discrepancies. **Managers and supervisors:** Must not participate in tip pools or influence distributions for personal gain. They are responsible for enforcing compliance and escalating concerns. **Payroll:** Must calculate, record, and report tips accurately and maintain supporting documentation. **HR:** Must review policy compliance, coordinate training, and investigate complaints or violations. **Internal Audit / Finance:** May perform periodic audits of tip records, distribution formulas, and reporting accuracy.

Violations of this policy may result in corrective action up to and including removal from the tip pool, repayment or adjustment of improperly distributed amounts where permitted by law, documented warning, PIP, suspension, or termination of employment. The company will also take steps to correct any payroll or tax reporting errors and may consult legal counsel when a potential FLSA, IRS, or state-law violation is identified.

Any exception to this policy must be approved in writing by HR and Payroll and reviewed for compliance with the FLSA and applicable state or local law. No exception may authorize a manager or supervisor to receive employee tips. If a jurisdiction imposes stricter tip-pooling limitations, those limitations control.

This policy will be reviewed at least annually and whenever federal, state, or local tip-pooling, minimum wage, payroll, or tax rules change. Revisions must be approved by HR, Payroll, and Legal before implementation.