Owners Taking Digital Tips? Illegal Tip Withholding Lawsuits

Attorneys working with ClassAction.org are looking into whether class action lawsuits can be filed against the owners of restaurants, chains and delivery services that may have illegally withheld digital tips from workers.

Specifically, the attorneys believe that when customers tip electronically through an application or tablet, workers may not be receiving the full amount of tips they are legally owed. Under the federal Fair Labor Standards Act (FLSA), owners are not permitted to retain any portion of workers’ tips—even when customers pay electronically.

A lawsuit could potentially help workers recover any digital tips they were entitled to but never received.

Can Owners Take Workers’ Digital Tips?

Under the Fair Labor Standards Act (FLSA), owners and employers are prohibited from withholding any portion of employees’ tips for any purpose, whether tips are paid directly or through a tip pool, even if the worker receives at least the full minimum wage without tips.

For instance, if a customer orders food through a restaurant chain’s app and leaves a tip for the delivery driver, the restaurant is required to pay the full amount of the tip directly to the delivery driver or through a valid tip pooling arrangement.

A tip pool—whereby the owner or employer collects the tips and redistributes them to employees—is the only instance in which employees may be legally required to share their tips. In most situations, only workers who regularly receive tips are permitted to participate in a tip pool, but if an employer pays its workers the full minimum wage (without counting tips), non-tipped employees like cooks and dishwashers can also participate. However, the FLSA specifies that under no circumstances are owners, managers or supervisors allowed to receive tips from the tip pool.

According to a Department of Labor fact sheet, it is illegal for an employer to require workers to give their tips to an owner or manager, and managers are only permitted to keep tips if they were received directly from a customer for a service the manager directly and solely provided.

Worker Complaints About Digital Tip Withholding

Employees have complained online about their electronic tips getting withheld, with many asking others whether the practice is illegal. Below is a sample of complaints posted on Reddit [sic throughout]:

I work at a small coffee shop chain in the USA, in Tampa, Florida. Currently, I make non-tipped minimum wage in Florida but I still get tips. However, while I still recieve cash tips, the owner of the store keeps all the electronic tips. Not a single employee that works there gets ANY electronic tips (which can end up at $20 an hour on a busy day), and since people don't really carry cash on them nowadays, I usually leave busy shifts with only $6 in cash tips.”
— Swimming_Drummer_485, Reddit.com

At the restaurant I work at, orders are taken at a registar, where most people pay with a credit card. Then, a little tablet asks for a tip, and I've seen me and my coworkers receive upwards of $500 a day in tips, however I've checked my pay stubs and I'm only getting paid for the hours I work, no tips. I thought I was legally entitled to tips I earn, so isn't this illegal?”
— ArtytheSecond, Reddit.com

Me and one other person have been assigned to work out of a specific tent every shift at a Halloween event. Sometimes people tip us on square from card transactions and Apple Pay. Our employer says we can't receive tips and that the tips ‘don't go anywhere’ or to anyone . I find this hard to believe. Does anyone know if that's possible or are they just taking our tips? I'm on terminal 3 every shift and she's on terminal 2 and we have our own sign in passcodes. So it would be easy for them to see who's getting tipped from what location of the event.”
— shanaand, Reddit.com

I’ve (18F) been working at my (extended) family’s restaurant since March 2023. Both my cousins are my boss & one is also the business owner. In the (almost) 5 months I’ve worked there, i haven’t received any of my online tips despite asking about them on 3 separate occasions and being told they do the payout every 3 months. They finally gave me my envelope today, & it’s only $150 for the 5 months I’ve worked there (checked w one of our cooks who has been there longer than me and his was the same). We have 12 people who work there, the only other 3 servers have been there for less than 5 months & i dont believe theyve received their payout[.] …  We use square to charge customers & theres an option to tip starting at around 15%.”
— Intelligent_Thing348, Reddit.com

How a Lawsuit Could Help

A class action lawsuit, if filed and successful, could help workers get back money they may be owed in tips they never received. It could also force the business owner or employer to change how its employees are paid, or how tips are distributed.

What You Can Do

After you get in touch, an attorney or legal representative may reach out to you directly to ask you some questions and explain how you may be able to help start a class action. It costs nothing to fill out the form, and you’re not obligated to take legal action if you don’t want to.

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