Tip pool restrictions no longer apply to certain employers

The Ninth Circuit Court of Appeals recently ruled that tip pooling restrictions do not apply to employers who do not claim a tip credit. The case is Cumbie v. Woody Woo, Inc, 2010 WL610603 (9th Cir.Feb 23, 2010)

What this means- if you are server working on the West Coast or any state that prohibits a tip credit, the employer can now require you to share tips with the back of the house, including dishwashers, cooks and even managers.  Court of Appeals for the second district of California stated ” Tip pooling is not illegal when the participants in the tip pool contribute to the Patrons Service, even if not providing direct table service.”

Employers who choose to take a tip credit are not allowed this exemption from tip pooling restrictions.  Employers are required to pay the wait staff the full applicable minimum wage if they require wait staff to include back of the house employees in the tip pool.  Wait staff are not expected to supplement back of the house employees wages if they are paid only a sub minimum wage.

This decision may have a huge impact on the income for many servers who work in states that prohibit a tip credit, which includes the entire West Coast.  They now may face a much higher tip out rate.

In the recent case, Misty Cumbie, the plaintiff and waitress who waited tables at Vita Cafe in Portland, Oregon was required to participate in a tip pooling scheme under which the kitchen staff received more than 50 percent of server’s collected tips and the server’s were only able to recover 30 to 45 percent of their collected tips.

The court stated, “Naturally, she would prefer to receive all of her tips, but the FLSA does not create such an entitlement where no tip credit is taken”.

In other words,  it seems that the court is allowing employers to use server’s tips as a method to  subsidize non-tipped workers.  A new chain of service has been invented  to help justify taking another slice out a server’s tips.

States that pay the highest sub minimum wages and where tip pooling restictions STILL APPLY include: Hawai $7hr, Connecticut $5.69 hr, and West Virginia $5.80.

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