Is It Legal For Employers to Make Waiters and Waitresses Pool Their Tips?
Many employees earn tips. Normally these tips belong to the people who efforts earned the tip in the first place. Almost 60 years ago, the United States Supreme Court recognized this principle, holding that “in businesses where tipping is customary, the tips, in the absence of an explicit contrary understanding, belong to the recipient. Where, however, [such] an arrangement is made…, in the absence of statutory interference, no reason is perceived for its invalidity.” Williams v. Jacksonville Terminal Co., 315 U.S. 386, 397 (1942)
Under the Fair Labor Standards Act, employers must pay their employees a minimum wage. The FLSA’s definition of “wage” recognizes that under certain circumstances, employers of “tipped employees” may include part of such employees’ tips as wage payments. The FLSA provides in relevant part:
In determining the wage an employer is required to pay a tipped employee, the amount paid such employee by the employee’s employer shall be an amount equal to—
- the cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such an employee on August 20, 1996; and
- an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in paragraph (1) and the wage in effect under section 206(a)(1) of this title.
The additional amount on account of tips may not exceed the value of the tips actually received by an employee. The preceding 2 sentences shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.
This means two things. First, it means that an employer may validly require its employees to participate in a tip pool. Second, it means that if the employer pays less than the minimum wage, the employer may make up the difference with a “tip credit.” As a result, if the cash wage plus the tips do not equal minimum wage, the employer must “top-up” the cash wage.
Many employers fail in this responsibility. In this case, the employee may have a valid case either in Superior Court or before the California Labor Commissioner.
If you are an employee or an employer in Northern California with a specific question about tip pooling arrangements, contact an experienced Sacramento Employment Attorney for legal advice. Also, check the Bowman & Associates Blog regularly for updates on wage/hour and other employment-related issues.
Sacramento Employment Law Attorney Sean Gavin helps clients across California. If you or someone you know has legal questions regarding wrongful termination, construction law, unemployment compensation, hours, wages & overtime cases and more, Sean Gavin is an aggressive advocate for your rights
