SW Legal studies in Business

Restaurant May Require Servers to Pool Tips
Description

Appeals court held that so long as an employer, such as at a restaurant, pays workers at least the minimum wage, it may require workers, such as servers, to contribute their tips to a common pool distributed to other employees.

Topic Labor Law
Key Words

Fair Labor Standards Act; Tips; Restaurants

C A S E   S U M M A R Y
Facts

Cumbie worked as a server at a café owned by Woo. Woo paid servers a wage higher than the minimum wage. The servers were required to contribute their tips into a pool. About a third of the tips went to the servers, the rest went to the kitchen staff. Cumbie sued, alleging that the tip-pooling arrangement violated the minimum wage provisions of the Fair Labor Standards Act (FLSA). The district court dismissed the suit for failure to state a claim. Cumbie appealed.

Decision

Affirmed. When tipping is a customary part of a business, the tips, in the absence of an explicit agreement to the contrary, belong to the recipient. However, where another arrangement is made, unless there is a statutory limitation, the arrangement is likely valid. That is the case here; the FLSA does not prevent employers who are paying at least the minimum wage, from disallowing employees to keep tips. The tip pool arrangement is fine so long as it does not reduce the server's wage to less than the minimum wage, which is not the case.

Citation Cumbia v. Woody Woo, Inc., ---F.3d--- (2010 WL 610603, 9th Cir., 2010)

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