Vegans and raw foodists in the Bay Area are losing a favorite restaurant, allegedly due to employee suits over tip pooling violations and other issues. When done correctly, tip pooling is a legal alternative to servers taking only the tips customers leave to them individually. But, as with many aspects of employment law, employers need to handle tip pooling well or risk a lawsuit.
The SFoodie blog reported that a Cafe Gratitude server sued the restaurant’s owners, claiming that required participation in “an unreasonable and uncustomary tip pooling scheme” left her too little a percentage of the tips. The owners countered that a majority of tip-receiving employees voted for the tip-sharing arrangement. This dispute ultimately settled, but the owners are either economically or emotionally too spent from the situation and are closing most of their Bay Area restaurants anyway.
This doesn’t have to happen to you or your clients.
An employer’s practice of tip pooling among employees is permitted by Lab C §351. Cases have held that, in addition to those workers who provide direct table service, bartenders, dishwashers, bussers, cooks, and hosts may also be included in tip pools. See Etheridge v Reins Int’l Cal., Inc. (2009) 172 CA4th 908, 91 CR3d 816. But until the California Supreme Court weighs in on the issue, employers should still proceed cautiously if nonserver employees are included in tip pooling arrangements. DLSE Opinion Letter 2005.09.08; DOL Field Operations Handbook, §30d04.
You need to make sure that the amount of tips shared is fair and equitable, and generally it has to have some relationship to the employee’s role in providing service. DLSE Opinion Letter 2005.09.08. A policy that requires servers to share 15 percent of their tips with other service employees (net of what they receive back from the pool) is presumptively reasonable. DOL Field Operations Handbook, §30d04(b).
And don’t forget that managers and supervisors can’t be in the pool. See Lab C §351 (employers and their “agents” cannot share tips left for employees).
Employees who have an issue with a tip pooling situation don’t have a private right to bring civil actions under Lab C §351, which may only be enforced by the Department of Industrial Relations. But employees can avail themselves of other remedies, such as common law conversion or restitutionary remedies under the unfair competition law (UCL) (Bus & P C §17200-17210). The plaintiff in the Cafe Gratitude issue made use of the UCL in her complaint.
CEB covers tips and tip pooling issues in its comprehensive new book, California Wage and Hour: Law and Litigation. Also check out CEB’s Advising California Employers and Employees, chap 5. And don’t forget: CEB’s Employment Law Practice: 21st Annual Recent Developments program will be live in SF on March 9th, and thereafter available On Demand.
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