Duff on Hospitality Law

At lunch time, Joy Ellis can be found at Addy’s Sandwich Bar, a food cart at the corner of SW 10^th and Alder. Here, she brings us an update on the thriving food cart industry in Portland.

Portland’s bustling food cart industry has come of age. With nearly 700 food carts actively dishing out some of Portland’s most creative and tasty cheap eats, the local food cart economy here is flourishing. Portland’s food cart industry has also helped build some thriving ancillary businesses, from food cart suppliers to sustainable to-go food containers to bicycle delivery services like Portland Pedal Power.

Food carts are generally a flexible, low-risk business model. They give an aspiring entrepreneur the opportunity to incubate a business idea and gather a following before taking the financial leap to a bricks-and-mortar restaurant, and they provide an affordable investment for business owners who prefer to stay small and avoid the risks and costs inherent in a storefront restaurant. 

The City of Portland is generally supportive of food carts, which pepper urban surface parking lots and occupy vacant lots and other underutilized sites. Portland’s regulations are relatively friendly (unlike some other cities, like New Orleans – where a food truck can’t park in the French Quarter, sell seafood, stay in one place for longer than 30 minutes or be parked near a restaurant). The various permits and licenses required of a Portland food cart vendor depend upon the size of the cart, its mobility, and its location (on private property or a public sidewalk). 

A recent Field Assistance Bulletin issued by the U.S. Department of Labor (DOL) on February 29, 2012, announced a substantial change of the DOL’s enforcement position regarding mandatory tip pooling with back-of-the-house employees. 

As we have discussed in this blog previously tip pooling is the practice by which the tips of regularly tipped employees are pooled together and then redistributed among employees, including, on occasion, employees who do not customarily receive tips. Employees may voluntarily participate, or they can be required to participate by the employer.

In 2010, the U.S. Court of Appeals for the Ninth Circuit issued a decision, Cumbie v. Woody Woo, Inc. (596 F.3d 577 (9th Cir. 2010), which held that DOL limitations on an employer's use of the employee's tips did not apply when the employer does not take a tip credit. In states like Oregon and Washington, where the employer must pay a tipped employee the full minimum wage and is prohibited by state law from taking a tip credit, the employer is permitted to impose a mandatory tip-pooling arrangement and insist that tipped employees share their tips with back-of-the-house employees, not just with employees who customarily receive tips. The court's ruling was a significant win for employers in the Ninth Circuit; the employer was represented by Garvey Schubert Barer, amicus briefs were filed by Oregon Restaurant and Lodging Association and others, and the DOL even submitted a brief and argued part of the case for the employee -- and lost.