Client Alerts

Restaurant Tip-Pool That Distributes More to Kitchen Staff Than Waiters Is Lawful

The Ninth Circuit Court of Appeals held that a tip-pooling arrangement that distributes the tips collected by the wait staff to all restaurant employees, including the kitchen staff, does not violate the Fair Labor Standards Act. Misty Cumbie worked as a waitress at the Vita Café in Portland, Oregon, which is owned by Woody Woo, Inc. The restaurant paid wait staff an hourly wage higher than the federal minimum wage rate. In addition, the servers received a portion of their daily tips.

The restaurant required its wait staff to contribute their tips to a "tip pool" that was redistributed to all restaurant employees. The largest portion of the tip pool went to the kitchen staff (i.e., dishwashers and cooks), and the remainder was returned to the waiters in proportion to the hours worked.

Cumbie sued alleging the arrangement violated the minimum-wage provisions of the Fair Labor Standards Act of 1938. Cumbie argued that since the kitchen staff were not "customarily and regularly tipped employees," the tip pool was an unlawful "kick back," and the restaurant was required to pay her the minimum wage rate plus all of her earned tips.

The Court disagreed. Whether a server owns her tips depends on whether there is an agreement to redistribute the tips. Such an agreement does not violate the FLSA. For Cumbie, the Court found there was an agreement to redistribute her tips by virtue of the tip-pooling arrangement. Thus, only the tips that were redistributed back to her were her own wages.