Litigation

Ninth Circuit: Tip pooling does not violate Fair Labor Standards Act.

By Shemia Fagan

Last month in Cumbie v. Woody Woo, Inc., the Ninth Circuit addressed whether a restaurant violates the Fair Labor Standards Act (FLSA) when, despite paying a cash wage greater than the minimum wage, it requires its wait staff to participate in a "tip pool" that redestributes some of their tips to the kitchen staff. 

Judge O'Scannlain, writing for the court, began with the default rule that an arrangement to turn over or redistribute tips is presumptively valid, unless such arrangement is forbidden by statute. The plaintiff, a server at a Portland restaurant, argued that tip pooling violates section 203(m) of the FLSA, which provides that restaurants must allow employees to keep all of their tips, except when the employee participates in a tip pool with other "customarily tipped employees."  The plaintiff argued that members of the kitchen staff are not "customarily tipped employees," thus rendering her tip pool "invalid."  The Ninth Circuit rejected the plaintiff's interpretation, finding that the FLSA "imposes conditions on taking a tip credit and does not state free standing requirements pertaining to all tipped employees."  (Emphasis in original.)

While rendering judgment for the employer here, the court hinted that the outcome may be different in situations where a restaurant pays its wait staff less than the minimum wage and utilizes a "tip credit" to make sure the employees' wages exceed the minimum wage.

Full post as published by Northwest Business Litigation Blog on March 02, 2010 (boomark / email).