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Mandatory Tip Pooling Among Employees in "Chain of Service" Does Not Violate California Labor Law
Posted: April 2, 2009
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Affirming dismissal of the plaintiff’s complaint, the California Court of Appeal has held that a restaurant’s mandatory “tip pool,” in which servers shared their tips with bussers, bartenders, kitchen staff, and dishwashers, did not violate the Labor Code. Etheridge v. Reins Int’l Calif., Inc., No. B05005 (Cal. Ct. App. Mar. 30, 2009). The plaintiff, a server at one of the employer’s restaurants, challenged the employer’s tip-pooling arrangement. The trial court rejected the employee’s claim, and the Court of Appeal affirmed. Rejecting the employee’s argument that tips belong to the servers or those involved in direct table service alone, the Court found that mandatory tip pooling among employees within the “chain of service” does not violate the Labor Code. Rather, Labor Code Section 351 prohibits employers’ managers or agents from taking tips from the “employee or employees to whom it was paid, given or left.” Tip-pooling recognizes that customers leave tips for all employees who service a table, not simply the person who first picks up the tip. The Court observed, “Dishwashers and other kitchen staff are encouraged to give their best possible service as they know they will participate in the financial rewards if the customers are pleased with their work, even though the customers do not personally see them doing it. And a mandatory tip pool makes certain that these employees receive their fair share when the patrons are pleased with their service, but have no way to tip them directly.” In reaching this conclusion, the Court relied on Leighton v. Old Heidelberg, Ltd., 219 Cal. App. 3d 1062 (Cal. Ct. App. 1992), which held that a mandatory tip pool which included bussers and bartenders did not violate California law. Earlier this month, the Court decided Budrow v. Dave & Busters of Calif., Inc., No. B205026 (Cal. Ct. App. Mar. 2, 2009), holding that the employer’s tipping policy, requiring servers to contribute one percent of their gross sales to bartenders and other non-management employees, did not violate Section 351 of the Labor Code. This case confirms that, as long as tip pools seek to equitably distribute tips among workers within the chain of service – seen or unseen – and not to benefit the employer, courts in California generally will be favorably disposed to the employer. Courts will not, however, aid employees who seek a bigger share of a tip pool, to the detriment of other service staff. When structuring tip pooling policies, employers should consult with counsel to ensure compliance with California and federal wage and hour laws.
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