The Oregonian report that a federal appeals court has ruled that restaurants can create a “tip pool” that requires servers to share a percentage of tips with kitchen staff so long as the restaurant pays more than the minimum wage.
The 9th U.S. Court of Appeals this week rejected arguments by a waitress at a Portland restaurant who claimed the pooling arrangement violated the Fair Labor Standards Act.
Misty Cumbie argued that because the tip pool at the Vita Cafe included employees who are not “customarily and regularly tipped employees,” it was invalid under the labor act.
The cafe requires its servers to contribute their tips to a pool shared by kitchen staff such as cooks and dishwashers, who got more than half the pool. The remainder was returned to servers in proportion to their hours worked.
But the owners of the cafe, Woody and Aaron Woo, argued the tip pool that included kitchen staff was allowed because the labor act applied only to employers who take a “tip credit” toward meeting the minimum wage by counting a portion of tips as wages.
The appeals court, in an opinion by Judge Diarmuid O’Scannlain, noted the restaurant did not take a tip credit and paid servers wages before tips that met or exceeded the Oregon minimum wage, which was $2.10 above the federal minimum wage at the time.
“Therefore, only the tips redistributed to Cumbie from the pool ever belonged to her, and her contributions to the pool did not, and could not, reduce her wages below the statutory minimum,” O’Scannlain wrote.
As a result, the opinion said, “Cumbie received a wage that was far greater than the federally prescribed minimum, plus a substantial portion of her tips.”
O’Scannlain added that “naturally, she would prefer to receive all of her tips,” but the court ruled the labor act does not restrict tip pooling when no tip credit is taken.
Although the appeals court noted it was the first time it had dealt with the issue of tip pools, Bill Perry, spokesman for the Oregon Restaurant Association, said he doubted the ruling would have much impact on Oregon restaurants.
“This will supplement the back of the house for some restaurants,” Perry said, “but you still want to reward your sales people.”