Indiana: Senate Bill 245

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Explicitly authorizes tip pooling

The bill adds language to Indiana law confirming that employers may require or allow tip pooling arrangements among employees.

A tip pool is a system where tipped workers contribute some portion of their tips to be redistributed among eligible employees.

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Defines key terms

The law creates statutory definitions for several terms used in tip-pooling rules:

• Tip – a voluntary gratuity given by a customer for service (not a mandatory service charge).
• Tipped employee – an employee who regularly receives tips (e.g., servers, bartenders).
• Nontipped employee – an employee who does not usually receive tips (e.g., cooks or dishwashers).
• Manager or supervisor – someone who directs employees or has authority over hiring/firing, or an owner with significant equity and active management.
• Tip pooling arrangement – a system in which tips are shared among employees according to a set formula or requirement.

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Limits who can receive pooled tips

The bill imposes restrictions to protect tipped workers:

• Managers and supervisors cannot receive tips from the pool.
• Tip pooling generally must involve eligible employees rather than management or the employer.

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Allows mandatory tip pooling (with conditions)

Employers may require employees to participate in tip pools, but only if certain rules are followed, such as:

• Employees must be informed of the pooling arrangement and contribution amounts.
• Employers may only take a tip credit based on the tips each employee actually receives after pooling.
• Employers cannot keep any portion of the tips.

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Purpose of the bill

The legislation primarily clarifies and codifies rules around tip pooling in Indiana, aligning state law with federal wage-and-hour guidance and giving employers clearer authority to use tip-sharing systems.