Mandatory Tip Pooling with Back-of-the-House Employees Prohibited under Fair Labor Standards Act
In a substantial change of enforcement position, the U.S. Department of Labor (DOL) has announced that employers can no longer require mandatory tip pooling with employees who do not “customarily and regularly receive tips” from guests, i.e. back-of-the-house employees like dishwashers, cooks, chefs and others. The DOL has recently advised its field offices nationwide to enforce its rule prohibiting mandatory tip pools that include such back-of-the-house employees. Despite the prohibition on mandatory sharing, employees may still voluntarily share tips with such employees. Bartenders, bus persons, and hosts may continue to share in mandatory tip pools.
The DOL previously had announced that because of the Ninth Circuit Court of Appeals’ 2010 decision in Cumbie v. Woody Woo, it would permit Ninth Circuit employers to impose mandatory tip pooling on employees who do not customarily and regularly receive tips from guests.1 But the DOL now claims in its Feb. 29, 2010, Field Assistance Bulletin that it is merely “filling the regulatory gap” and that “nothing in [the Cumbie v. Woody Woo decision], which addressed the regulatory scheme as it existed at the time of the decision, precludes the agency from filling this gap with its legislative rules promulgated pursuant to specific congressional authorization and after notice and comment.” Employers and trade associations are weighing options for a legal challenge to the DOL’s new enforcement position.
Best Practices
Ninth Circuit employers should review and revise tip-pooling policies (or ask counsel for help) to ensure that mandatory tip-pooling arrangements comply with the DOL’s newly imposed restrictions. Be sure that managers and other employees who do not “customarily and regularly receive tips” from guests are not part of mandatory tip-pooling arrangements.
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FOOTNOTE
1 The Ninth Circuit includes the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, and Washington.