One of my first jobs was at Baskin Robbins. It was basically every high school kid's dream job. I made enough money to move out my senior year, had enough down time to get most of my homework done, gave away loads of free ice cream to all of my friends, and learned a thing or two about customer service, while making some untaxed tips. My boss, Phil, was cool. At first I thought he was a total creeper, but in retrospect, he was a pretty nice guy. When it came to his business, he worked hard and was mostly hands off. He opened every morning, stayed for about two hours after the closing person got there, and then was gone. While we weren't really allowed to have a tip jar, Phil would put out a little cup with some change that said “pennies” in front of the register. We would usually plant a dollar in it at the beginning of a shift, and magically the dollar would multiply. On days when my shift overlapped with Phil's, he would dip into the tip jar when he left, taking whatever he felt like. Being a high schooler, with no service experience, this didn't really bother me at the time. Looking back however, I see that Phil was violating a very well-known rule: owners should never take tips. While it seems like there could be some grey area here, in my opinion, this rule has only one exception. If an owner is working their business by themselves, without any help, from any employees, then, and only then, they may keep tips that are given to them.
I think that when owners transition from having such a small business that they make tips (because they don't have any employees yet), to having some employees while still doing a lot of customer oriented work, it creates this supposed “grey area.”
A prime example of this would be a little deli/restaurant called Thai Fresh. Jam Sanichat and Bruce Barnes, a married couple that met while working together at Hoover's, opened a business together. Jam is from Thailand and their business revolves around her cooking. The business started as most do: very small. Jam and Bruce rented a space where they offered a variety of things from Thai cooking classes and a small store, to an ice cream shop and a Thai deli style restaurant. In the beginning of this business venture, Jam and Bruce were the only employees. But as their business grew, they hired a couple of people. This is when they should've taken their hands out of the tip jar. However, they continued to take tips for quite some time. Eventually they stopped, for whatever reason, whether it be because they found out it was illegal or sensed some employee disgruntlement. Thai Fresh continued to grow. I'm surprised at that for several reasons. The food was not fresh. It was all pre-made and then microwaved, after sitting in a deli case for who knows how long. Also, this microwaved food was expensive (about $13 a plate). And lastly, the service was some of the worst I've ever encountered.
About a year and a half ago, Jam and Bruce bought the cafe next door (previously called Cafe Caffeine), mostly for want of the wine and beer license, and renamed it Thrice Cafe. A good friend of mine (who doesn't want to be named) worked there before the transition and worked for Jam and Bruce until he was fired about two weeks ago. Under its new ownership, the cafe didn't change much, until recently.
For months, Jam had been toying with the idea of full-service. But she didn't want to go all the way. If she went full-service, she was afraid her beloved Thai Fresh employees would quit (I say beloved because although they made tips, had no people skills, and for the most part seemed lazy as shit, they all started at $10/hour). So after much debate, she decided to go half way. She changed the layout of her business by getting rid of the deli and started cooking made-to-order meals. The previously cooks and counter people became only cooks and all ordering was routed through the cafe side. In doing this, she dramatically upped the workload of the one barista and changed the overall job description of her previous cook/counter people. The cooks would no longer deal with customers and therefore would not have a tip jar. My friend came to work a day after the switch. At the beginning of his shift, Jam told him that the tips would be pooled from then on and his tip jar had a sign on it that said, “tips for cooks.” Everyone was going to share tips, and Jam had figured that 60% of the total tips should be given to the cooks.
Never having worked in a full-service restaurant, my friend didn't realize that this was completely insane. When he told me about the new system, he said that 60% seemed high and asked if that was normal. After finding out that it was unheard of, he did a little research. Sure enough, Jam and Bruce were entering an illegal tip-pool. The law clearly states that only employees who regularly provide customer service and regularly receive tips may be included in any kind of tip-pool.
When confronted with the law, Bruce said it was a "crock of shit" and Jam said she didn't think it was fair. She used to cook in a restaurant and she had always thought that she deserved tips. She told my friend that he wouldn't be making all of those tips without the cooks, in the first place.
So why is it illegal for cooks to be included in a tip pool? Well, cooks don't deal with customers and generally don't receive tips (sushi restaurants are an exception to this norm). Wages for cooks vary, depending on the amount of skill required for a particular cooking job, but most line cooks in this city start at minimum wage. Jam wanted to be a good boss and pay her staff a living wage, which is admirable, but what she doesn't understand is that the financial responsibility of that action is only hers. By forcing tipped employees to tip out kitchen people, Jam was effectively having her front-of-house help pay the wages of her back of house. The real problem at Thai Fresh is that Jam and Bruce had too much involvement with employee tips. They wanted the tips to be fair and they took it upon themselves to smooth things out. But when it comes to tips, things really aren't fair. You can give really great service and still make a shitty tip, or contrarily you can give awful service and still get 20%.
Really what it comes down to is that owners shouldn't take tips (or use them to pay other employees) because they make money off of each sale that is made. Every time that you get tipped 20%, your boss is making double that (if it's ran right). A good boss will want their employees to make good tips, because that means that they are doing well also. Part of the cost of owning a business is paying wages for employees that help front-of-house, whether that be a top notch chef or a janitor. These positions aren't really helping the front-of-house, they are helping the owner.
Perhaps this "grey area" is only grey because owners are allowed to supplement some of their employees’ wages with tips. I think we all know how I feel about that already.