Under a recent court ruling, a restaurant employer may require servers to pool tips and even distribute a portion of that tip pool to cooks, dishwashers, supervisors and other employees who are not commonly tipped.
However, this ruling only affects restaurant employers who pay servers at least the minimum wage. If the employer takes advantage of a tip credit under federal or state law, then employees are entitled to keep their own tips.
In Cumbie v. Woody Woo, Inc., a class-action suit, the 9th Circuit Court of Appeals ruled that because the restaurant paid servers a wage that was $2.10 per hour more than the minimum wage, the employer could force servers to pool 100% of tips earned. The tip pool was then split between servers and kitchen staff. Normally in the restaurant industry, cooks and other back-of-the-house employees do not share in tips, but are paid much higher wages than food servers.
The lawsuit concerned food servers at Vita Café in Portland, Oregon, a casual restaurant that serves healthy cuisine with a focus on vegetarian and vegan meals.
Under the arrangement at Vita Café, employer Woody Woo, Inc. require food servers to participate in the tip pool. Each server received only 30% to 45% of his or her own tips.
Employers should keep in mind that this ruling applies only to employers who pay servers the full minimum wage or more.
The tipped minimum wage has long been a bone of contention for restaurant employers. Some labor advocates want it eliminated entirely, and have succeeded in a few states such as Washington, Oregon, Alaska and California.
The tipped minimum wage varies widely from state to state. Virginia actually permits an employer to take a 100% tip credit – meaning an employee who averages $7.25 per hour or more is not entitled to any hourly wage. At the opposite end of the spectrum are Oregon, Alaska, California and Washington, which do not allow employers to pay tipped employees less than the minimum wage. Tipped workers in Oregon are entitled to $8.40 per hour, while tipped workers in Washington must be paid $8.55 per hour.
The federal tipped minimum wage is $2.13 per hour, but many states require that tipped employees be paid more. Even when the federal rate is in effect, the tipped employee must earn at least $7.25 per hour in tips plus hourly wage. This means if the employee averages less than $5.12 per hour in tips over the payroll week, the employer must make up the difference in wages.
