Tip-Pooling Found Acceptable by Oregon Restaurant: No Credit Taken Against Minimum Wage

The Ninth Circuit Court of Appeals upheld an Oregon employer’s tip pooling arrangement that was challenged by a waitress who claimed her employer’s tip-pooling arrangement violated the Fair Labor Standards Act. The case, Cumbie v. Woody Woo, Inc. d/b/a Vita Café, No. 08-35718,

http://www.ca9.uscourts.gov/opinions/view_subpage.php?pk_id=0000010304

was decided on February 23, 2010. The plaintiff, Misty Cumbie, claimed that the Café violated the FLSA by requiring its wait staff to “pool” tips received from customers and then share them with the kitchen staff and other servers based upon a pre-set formula based upon hours worked. The plaintiff claimed that the kitchen employees are not “customarily” tipped by customers and so that the pooling of the tips would violate the FLSA.

Tip-pooling among employees is permissible under the FLSA. Keep in mind that many employees who customarily receive tips are not paid the statutory minimum wage per hour. An employer can pay a customarily tipped employee less than the minimum wage (but not less than $2.13 per hour) as long as the tips received by the employee bring them up to the statutory minimum. If the employee fails to earn enough in tips, the employer must “top up” the wages to reach the minimum.

These employees can participate in a tip-pooling arrangement, provided that the employer ensures that the participating employees are all “customarily” the type of employee that receives tips. Waiters, bartenders and sometimes even busers would fall into this category in a restaurant.

Cumbie claims that the Café violated the FLSA when it forced her and others to pool tips to share with the kitchen staff, as they are not “customarily” tipped. However, the Court stated that the Café did not violate the FLSA because it paid all of its employees at least the minimum wage in addition to their share of the pooled tips from customers. Because the Café was not seeking a credit against the minimum wage for the tips received, the pooling arrangement could include those employees who are not “customarily” tipped.

Keep in mind that when tip pooling arrangements include employees who are not customarily tipped, the employer may lose the ability to take the tip credit against the minimum wage.

The Court ultimately upheld the lower court’s dismissal of Plaintiff Cumbie’s proposed collective action.

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