Tip Pooling

by Stephanie Yasuda

The Department of Labor (“DOL”) has proposed new regulations under the Fair Labor Standards Act (FLSA) that would allow full-service restaurants to pool tips between servers, bartenders, and other tipped employees with back-of-house staffers such as cooks, dishwashers, and cashiers. Under current rules, only tipped employees can take part in a tip pool. This means back-of-house employees cannot share in any tips.

The tip pooling proposal would apply only where the employer does not count tips as a portion of servers’ wages. The FLSA permits employers to take a “tip credit” by paying tipped workers as low as $2.13 per hour, provided they earn the federal minimum wage of $7.25 per hour when tips are counted. The proposal would not apply where the employer takes a tip credit, meaning the DOL’s proposed amendment with regard to tip pooling will only affect employees who receive the full minimum wage before tips.

The DOL believes its proposal will “decrease wage disparities.” You can read the DOL’s press release here: https://www.dol.gov/newsroom/releases/whd/whd20191007 and here: https://www.dol.gov/WHD/flsa/tipcreditnprm.htm

What does this mean to California tipped workers? Not much. This rule change is under the FLSA, which is a federal law. When California law offers greater protection to employees than federal law, California law controls. California law differs from the FLSA in a few ways. First, California employers are not permitted to take a tip credit under California law. Employers must pay hourly employees the full California minimum wage (presently $12.00 per hour) before tips. Second, tip pooling is permitted in California, provided the employees are all in the “chain of service” that results in a tip from a particular customer.

So are you in the chain of service? Well, there isn’t a definitive answer. We know from past rulings by California courts that servers, bartenders, hosts, and bussers are all likely within the chain of service. Under California’s broad standard, cooks may be included as well, but it’s currently unclear. Owners, managers, or supervisors of the business, however, are specifically barred from sharing in the tip pool.

The DOL’s proposed regulations will be subject to public comment for 60 days. The DOL will then consider any input before issuing the final rules.

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About the Author

Stephanie Yasuda is a principal attorney at Yoon Law, APC. Ms. Yasuda earned her J.D., cum laude, at Loyola Law School located in Los Angeles, CA, and has also been recognized as one of Southern California’s Super Lawyers Rising Stars, for the 2018 - 2019 year.

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