Illegal Tip Pools – Don’t Get Caught In The Cookie Jar!
If you have ever worked in the restaurant or bar industry, it is likely you have participated in a tip pool. A “tip pool” is very common in restaurants and establishments where employees who receive tips are required to “pool” those tips together so that other employees, who may not directly receive the tips, can receive a portion of the tips.
Many employees may be surprised to learn, that the employer’s obligation extends far beyond just dividing the money amongst the employees.
Under the Fair Labor Standards Act (“FLSA”), a tip pool is valid only if all of the participating employees are those that “customarily and regularly receive tips” (1).
So if you are already guessed that dishwashers, cooks, and chefs do not customarily receive tips, you are correct. This is where employers get caught with their hand in the cookie jar! When those who do not customarily receive tips are allowed to participate in the tip pool and take a portion of the tips from for example, the servers and other tipped employees.
Another good example is that managers cannot typically participate in these tip pools. The same logic is followed in that managers are performing duties (i.e. scheduling, making sidework assignments, taking customer complaints, etc.) that do not customarily receive tips.
The next question, is what about hostesses?
The seminal case on this issue is Kilgore v. Outback Steakhouse of Florida, Inc. out of the Sixth Federal Circuit (Ohio). In Kilgore, the specific issue before the Court of Appeals was whether the “hosts” at Outback could legally participate in the restaurant’s tip pool along with other tipped employees. The case hinged on the legal question of whether the “hosts” at Outback were customarily tipped employees.
The Court first looked to the language in Section 203(t) of the FLSA which defines “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”
That definition essentially contains a two-part analysis:
(1) whether the position is one that customarily receives tips and
(2) whether the employee in question receives at least $30 a month in tips.
Typically the second part of the analysis is not at issue. In Kilgore, it was not at issue either as it was admitted that the “hosts” at Outback received at least $30 a month in tips.
This left open the first part of the analysis, whether the “host” position is “an occupation” that customarily receives tips. The Court sided with Outback on this issue. Central to the Court’s analysis was determining the level of direct customer contact that the position in question entailed.
In Kilgore, the Court held that “hosts” have ample customer contact, similar to servers and bartenders, and therefore they should not be grouped with traditional non-tipped employees like cooks, dishwashers and chefs who usually work out of sight from the bar or dining area.
Therefore, “hosts” could be considered “tipped employees” under the FLSA; therefore, their participation in the tip pool was valid.
What about bussers?
Bus persons are explicitly mentioned in 29 C.F.R. § 531.54 (referenced below) as an example of restaurant employees who may receive tips from tip outs by servers. Bussers and hosts can be distinguished from other restaurant employees like dishwashers, cooks, or off-hour employees like an overnight janitor who do not directly relate with customers at all.
The two part analysis can also be applied to other positions such as an expo server. The outcome from expo servers has gone both ways as it hinges on the customer contact the position entails.
If for example, the position of the expo server involves just making sure the plating is correct and presentable but does bring the food to the table, the argument could be made that there is not enough customer interaction for that person to be able to participate in a valid tip pool. If they are, however, running the food to the tables, that may be enough customer contact to participate in a valid tip pool.
If you are a tipped employee and believe that your employer is not paying you all of your wages for all of your lawfully earned time or taking part of your tips or participating in the tip pool as prohibited under the Federal Fair Labor Standards Act, please contact our labor and employment law attorneys to set up a free consultation.
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