Trevor-LargeTrevor D. Large, Partner

In a 2-1 decision, the San Francisco-based U.S. Ninth Circuit Court of Appeals upheld a 2011 U.S. Labor Department rule that businesses cannot share tips given to waiters, casino dealers and other service staff with the support staff such as dishwashers and table runners, even if the tipped employees are paid minimum wage.

[1]  This overturned lower court decisions in Nevada and Oregon that had ruled the Labor Department regulation was reasonable and consistent with Congress’ goal of ensuring that tips stayed with the employees who receive them.

California law prohibits employers from deducting tips from an employee’s minimum wage of $10 an hour, but allows them to require tip-pooling as long as the tips don’t have to be shared with supervisors or managers. California case law has confirmed that a restaurant could mandate its waiters and waitresses share their tips with all employees who are in the chain of service that bears a relationship to the customer’s overall experience, including front-line cooks, bartenders and those who bus tables.

Following the 9th Circuit ruling, the U.S. Labor Department said its regulations do not extend tip-pooling to cooks and dishwashers, who are not generally tipped by customers. That means employers in California and elsewhere could not require their employees to share tips with those particular co-workers.

Restaurateurs and other hospitality business operators must now revisit their own policies to determine  how to proceed following this ruling.  We suggest that you contact our legal team to determine how this change in the law might affect your tipping policies.

Trevor D. Large, Partner