Many restaurants require servers to participate in a “tip pooling” arrangement.  This policy requires tipped employees to share a portion of their tips with host employees, bussers, or kitchen staff.  A new decision from the Ninth Circuit Court of Appeals refused to declare standard tip pooling arrangements as a violation of the minimum wage provisions of the Fair Labor Standards Act.

In Cumbie v. Woody Woo, Inc., a server brought a class action claim against her employer, seeking invalidation of the mandatory tip pooling policy.  The restaurant requires tipped employees to pool a portion of their tips for distribution to kitchen employees among others.  The FLSA’s minimum wage requirements permit restaurants to pay a cash hourly wage of $2.13 to tipped employees, and obtain a credit for the remaining portion of minimum wage through tips.  The plaintiff alleged that mandatory participation in a tip pooling arrangement violated this requirement, especially where traditionally non-tipped employees such as cooks participate in the pool.

The Ninth Circuit rejected these arguments, affirming summary judgment for the employer.  If as in this case, the tip pool compensated kitchen personnel, the employer could not claim credit toward minimum wage.  However, as long as the employer otherwise meets the minimum wage requirement, the FLSA does not independently prohibit the tip pooling arrangement.  The court also rejected use of the Department of Labor’s anti-kickback regulations to prohibit tip pooling.  The pooled tips never “belong” to the server, and therefore are not deemed to be an illegal rebate to the employer.

Many states limit the amount of server tips that can be made part of a tip pool.  Under North Carolina law, this maximum is fifteen percent.