Can a manager collect tips, or is that wage theft? Here’s what Washington state law says
On Wednesday, The Herald published a report about a U.S. Department of Labor investigation into two downtown Bellingham restaurants that determined the owners owe servers and cashiers tens of thousands of dollars in back pay after they were forced to share their tips with their managers.
In light of the report, here’s a closer look at Washington state law regarding tips, service charges and wage theft, as well as options for employees who think they’ve had their wages stolen.
WA wage theft law
Washington law doesn’t allow businesses to withhold wages from their employees. Under RCW 49.48.010, it is illegal for an employer “to withhold or divert any portion of an employee’s wages.”
There are three exceptions outlined by the RCW. The first is withholdings that are required by federal or state law. There are also exceptions for withholdings that go to medical care and any other withholdings agreed upon in advance by the employee and employer.
What about tips?
According to the Washington State Department of Labor and Industries, tips must be paid out in full to employees, and they can’t be used to count toward an employee’s hourly wages.
The rules become slightly more complicated if a business uses a tip-pooling model. In these cases, employees pool together their tips, which are then distributed among workers. Businesses can pay hourly employees who don’t typically collect tips, such as kitchen workers, a portion of the tip pool. However, business owners and exempt employees, including managers, aren’t allowed to collect.
If a business doesn’t use a tip pool, exempt employees and business owners are allowed to collect tips on services they provided themselves.
Businesses have two options for distributing tips in a timely manner, according to L&I. They can allow employees to take tips home with them as they’re earned, or they can pay out tips on the employee’s paycheck for that pay period.
Currently, employers are required to deduct taxes from tips. Aside from that, they are only allowed to deduct from a tip if it’s to cover a proportionate amount of a processing fee on the transaction. For example, a restaurant can deduct 3% of a tip if there’s a 3% credit card processing fee, but can’t deduct the 3% processing fee for the customer’s entire bill from the tip.
Service charges aren’t considered tips, and can go to the business instead of the employee. However, if a business keeps a portion of the service charge, it has to specify that on both the menu and the check. If it isn’t disclosed, then state law requires the full amount to be given to the employee who provided the service. Like tips, state law requires service charge payments to be added onto existing wages.
What about federal law?
Federal law also contains protections for tipped employees, although in general, it’s not as stringent as state law.
While it’s illegal in Washington, according to the U.S. Department of Labor, federal law allows an employer to count a “tip credit” toward the requirement to pay an employee the federal minimum wage.
Otherwise, employers and supervisors aren’t allowed to take a portion of an employee’s tips, or collect from a tip pool. Like under state law, managers can still receive tips for services they performed themselves.
Wage theft recourse
If you believe your employer has been unfairly withholding wages or tips from you, there are a few things you can do. For violations of federal law, you can file a complaint with the Department of Labor’s Wage and Hour division. However, that’s not a guarantee that the department will enforce its findings — in the recent Bellingham case, a DOL official told The Herald that budget constraints got in the way of the department enforcing its decision.
At the state level, L&I handles wage complaints. You can fill out a complaint form on the department’s website, and L&I will investigate your claim. The department will let you know their decision within 60, or if the investigation can’t be completed in that time-frame.
According to Jeff Mayor, a communications consultant at L&I, the department received 7,436 wage complaints in 2024, 8,246 in 2023 and 5,983 in 2022.
If L&I finds in your favor, state law gives the department broad reign to compel your employer to pay back your wages. If necessary, the department can issue a citation ordering your employer to pay the wages you’re owed. However, according to the department’s website, L&I “will make every attempt to, but cannot guarantee, collection.”
Mayor told The Herald in an email that the department can put a lien on the business in question if all else fails.
“Our first step is to work with the employer to pay the wages in question,” Mayor said. “If that is not successful, we also have the option of placing a lien on the real property assets of the employer who is liable for the wages. Once a lien is filed, L&I can levy bank accounts to recoup the money.”
The complaint form covers any of the following wage-related issues:
Unpaid wages
Unpaid tips
Paid sick leave violations
Overtime not paid correctly
Meal or rest breaks not provided
L&I doesn’t handle complaints regarding unpaid vacation time or holidays and expense reimbursement. Additionally, wage complaints regarding businesses that have filed for bankruptcy are handled in federal bankruptcy court.
Can you sue your employer?
You can also opt to file a lawsuit instead of going through L&I or the DOL. State law specifies that an employer who willfully withholds wages is liable to pay back double the amount owed to employees. According to WashingtonLawHelp.org, a legal resource site maintained by the Northwest Justice Project, that only applies to lawsuits and not to cases resolved by L&I.
“Once a lawsuit is filed, L&I stops any investigation it might have been conducting into the matter,” Mayor said.
That option could prove costly, and in some cases attorney’s fees could exceed the amount that you’re owed. If your lawsuit is successful, though, state law requires your employer to pay your attorney’s fees. Additionally, class-action lawsuits can be an option in cases where a business has wrongfully withheld wages from several employees.
This story was originally published February 20, 2025 at 2:20 PM.