UPDATE: Dive Into Employee Tip Pools And Find Yourself Swimming With Sharks


Recently, we shared with you an article published by our Alcoholic Beverage and Liquor License Practice Group regarding the use of employee tip pools. The article discussed the allure of employee tip pooling, which allows for employees who may not directly interact with customers to share in tips. As we often do, we also mentioned the potential pitfalls associated with this practice. Since the publication of the prior article there have been a couple of high profile disputes that have made headlines, including:

  • A class action lawsuit filed against a restaurant owned by celebrity chef Gordon Ramsay, accusing the restaurant of withholding employee tips and other wage and hour violations.
  • The denial of celebrity chief Daniel Boulud's attempt to have a class action law suit against him and his restaurant dismissed. The lawsuit alleges that employees were not being compensated appropriately when they performed non-tipped tasks.

Unfortunately, tip pools are making headlines and not in a good way! And we are likely to see more headlines in the future. For example, a federal court in Oregon is set to decide whether the Department of Labor overstepped its authority when it issued rules regarding tip pools (which we discussed with you in our prior article). In addition, there is case pending before the New York Court of Appeals (New York's supreme court) involving Starbucks' tip practices, which could have major repercussions for employee tip pool arrangements in New York.

As we mentioned before, it's important for employers to understand what they are jumping into when they approve employee tip pooling.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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