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Pooling OK if there's no tip-credit?

tip jar

Question:

I’m getting conflicting answers. In California, since we don't have an employer tip-credit, can we share tips with cooks and other BOH workers? I have read that since California doesn't have the tip-credit that this form of tip sharing is legal. Can you advise?

– Rocco Biale, Owner, Rocco’s, Walnut Creek, CA

Answer:

I’m not surprised that you’re getting conflicting answers because people are very confused and the situation continually changes with various court rulings in different states.

A brief overview: most states have an employer tip-credit where the tipped minimum wage is lower than the non-tipped minimum wage and the tips make up the difference. Additional tips must go to the tipped employee or be entered into a valid tip pool, which means no management or back-of-house employees.

Seven states—Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington—do not allow a tip-credit. That is, tipped and non-tipped employees earn the same minimum wage. The practice in those states had been that those tips similarly continue to remain property of the tipped employees only (whether pooled or not). For example, in Minnesota the guideline states, “Tips are the sole property of the direct service employee. Employers cannot require employees to share their tips with indirect service employees.”

California has relaxed this guideline a bit based on some recent court rulings but it is still fairly unclear: “Labor Code Section 351 provides that ‘every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.’ The section has been interpreted to allow for involuntary tip pooling so long as the tip pooling policy is not used to compensate the owner(s), manager(s), or supervisor(s) of the business, even if these individuals should provide direct table service to a patron or are in the chain of service to a patron. In addition, the policy must be fair and reasonable. Therefore, your employer can require that you share your tips with other staff that provide service in the restaurant so long as the employees that share in the tip pooling policy are employees to whom the tip was paid, given, or left for. In this regard, the courts have validated policies that distributed tips among employees who provide ‘direct table service’ or who are in the ‘chain of service’ provided that employee in the chain of service bears a relationship to the customers’ overall experience.” (emphasis mine). 

The legal gray area is defining who is in the “chain of service” and “bears a relationship to the customers’ overall experience.” A good manager knows, for example, that if there are no clean dishes, the guest would have a bad experience and might argue to include dishwashers. The courts would probably disagree.  My best advice is to align yourself with the practices recommended by your state restaurant association in consultation with your attorney, and clearly spell out your house practices in your employee handbook.

You can dig deeper on these rulings here.

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