Since 2010, the law has been in flux as to whether certain restaurant employees may or may not be allowed to participate in tip pools, particularly in states located in the jurisdiction of the U.S. Court of Appeals for the Ninth Circuit (these states include Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington).  However, a recent ruling from the Ninth Circuit has clarified this issue, and it is now clear that restaurants and hotels cannot require servers to pool and/or share tips with non-tipped kitchen and other back of the house staff such as dishwashers, chefs or cooks who do not customarily and regularly receive tips, even if the restaurant does not utilize the tip credit.  To fully appreciate this decision, it is necessary to re-visit the recent history of uncertainty surrounding this rule.

The primary issue is whether tip-credit restrictions can be imposed on employers who do not take a tip credit.  While employers can require servers to participate in a tip pool with others who customarily and regularly receive tips even if they take a tip credit,  the Fair Labor Standards Act (“FLSA”) is silent as to whether employers who do not take a tip credit can require servers to participate in a tip pool with kitchen employees.  Based on this premise, the Ninth Circuit held in 2010 in Cumbie v. Woody Woo, Inc., that an employer could require servers to pool tips to share with non-tipped kitchen and other back of the house staff who did not customarily and regularly receive tips, as long as (i) the servers were paid at least minimum wage; and (ii) the employer did not take a tip credit.  The Ninth Circuit concluded that nothing in the text of the FLSA restricted employee tip pooling arrangements when no tip credit was taken. Continue reading →