Duff on Hospitality Law

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.   

As many of you are aware, the 9th Circuit Court of Appeals gave Northwest restaurant owners much to cheer about early last year when it authorized Northwest restaurants to initiate mandatory tip pools including back-of-house employees who traditionally do not receive tips. A complete description of the Court's decision in Woody Woo and its immediate effects can be found in my blog post from last November.