Ninth Circuit Weighs In on Tip Pooling Under the FLSA
By John Anthony
In Cumbie v. Woody Woo, Inc., the Ninth Circuit recently ruled on whether a restaurant violates the Fair Labor Standards Act when, despite paying a cash wage greater than the minimum wage, it requires its wait staff to participate in a "tip pool" that redistributes some of their tips to kitchen staff.
In the Cumbie case, the Plaintiff worked as a waitress in a restaurant. The restaurant paid its servers a cash wage exceeding the federal minimum wage. In addition to this cash wage, the servers received a portion of their daily tips. The restaurant required its servers to contribute their tips to a "tip pool" that was redistributed to all restaurant employees including kitchen staff that did not wait on customers. Neither the owners nor management participated in the tip pool.
The Court held that the restaurant's tip pooling policy did not violate the FLSA because the FLSA only restricts tip pools to employees who are customarily tipped when the employer takes a tip credit. A tip credit occurs when an employer pays a cash wage below the minimum wage and then supplements the minimum wage with tips.
Notwithstanding the Ninth Circuit's decision upholding a tip pooling practice in these circumstances, California employers must be mindful that such a tip pooling practice would not be lawful under California law. California does not allow payment of subminimum wage, and generally does not allow tip pooling participation by employees who do not provide direct table service to customers.