News & Analysis as of

Tip Pooling Tax Implications—What Employers Need to Know

The sharing of tips is referred to as “tip pooling,” “tip splitting,” or “tip sharing.” For purposes of this discussion, we will refer to the sharing of tips as tip pooling. Tip pooling occurs generally in two forms....more

Tip-Toeing Around Class Actions: Can a “No Tipping” Policy End Wage and Hour Litigation in the Hospitality Industry?

Joining a budding national trend, renowned restaurateur Danny Meyer of Union Square Hospitality Group last week announced that he will eliminate formal tipping at his restaurants starting in 2016. Meyer stated that the new...more

Litigating California Wage & Hour and Labor Code Class Actions

We are excited to announce the 15th edition of Seyfarth Shaw’s publication Litigating California Wage & Hour and Labor Code Class Actions. As in previous editions, the publication discusses and analyzes the most commonly...more

Fifth Circuit Tips Its Hand as to Analysis of FLSA’s Tip Credit

Restaurants throughout the Fifth Circuit, and even beyond, should review the recent decision of Montano v. Montrose Restaurant, which discusses the often tricky and always fact-intensive question of whether a restaurant...more

Fifth Circuit Rules on Tip Pooling

In Montano v. Montrose Restaurant Associates, Inc., the U.S. Court of Appeals for the Fifth Circuit was presented with what may seem like an easy issue:  does including a “coffeeman” in a tip pool invalidate the tip credit? ...more

Fourth Circuit Says Tip Pooling Rules Only Apply if Employer Claims Tip Credit

Restaurants and some other hospitality industry employers often take advantage of a sub-minimum wage applicable to employees who receive tips as part of their income. In recent years, a number of these employers have been the...more

Employment Newsletter - April 2014: Tips, Tip Pooling and Service Charges: Developments & Guidelines

Mandatory service charges and their distribution among waitstaff have plagued the Hospitality industry for years. Federal courts interpret federal laws differently, and states have enacted their own statutes that keep...more

New York Employers – 2013 Year in Review and Looking Ahead to 2014

“Many people look forward to the new year for a new start on old habits.” While the author to this famous New Year’s quote remains unknown, that certainly doesn’t make it any less true, including for employers. We hope that,...more

New "tipping" rules for 2014: Are you ready?

Employer practices with tips at hotels and restaurants have spawned a lot of employee discontent, class actions and other litigation. Some employers have withheld all or a portion of employee tips to cover administrative...more

Take 5 Newsletter: Wage and Hour Update - October 9, 2013

- IRS Will Begin Taxing a Restaurant's Automatic Gratuities as Service Charges Many restaurants include automatic gratuities on the checks of guests with large parties to ensure that servers get fair tips. This method...more

Coyote Ugly Bouncers Join the Tip-Pool Dance

A federal judge in the Middle District of Tennessee recently held that bouncers (sometimes referred to as “security guards”) at Coyote Ugly Saloons were properly permitted to participate in tip pools with bartenders,...more

New York Court of Appeals Issues Opinion Addressing Tip Pool Arrangements

The New York Court of Appeals recently issued an opinion addressing Starbucks’ tip pooling practices with regard to its shift supervisors and assistant store managers, which we discussed here....more

N.Y. Court of Appeals Allows Hospitality Industry Employer Broad Discretion in Mandatory Tip Pooling

In decision that is helpful to hospitality industry employers, the New York State Court of Appeals has given restaurants and other food outlets considerable flexibility in establishing mandatory tip pooling for service staff....more


Who, What, Why . . . Who does it apply to: Employers who take the “tip credit” against wages of some or all of their employees....more

Hawaiian Supreme Court Issues Ruling Regarding Restaurant Service Charges

When is a “service charge” a tip? And who gets it, the employer or the employee? These aren’t just questions of etiquette, but are now serious issues for the restaurant and tourism sector in Hawaii....more

New York Upholds Tip Sharing By Starbucks Assistant Managers

I had a smart aleck friend who tried to come up with the Starbucks coffee order that had the greatest number of syllables. I can’t remember the winning combination, but it definitely had the words “half-caf” and “cinnamon”,...more

Employment Law -- Jul 18, 2013

D.C. Circuit Flips DOL’s Flip-Flop On Mortgage Loan Officers - Mortgage loan officers may qualify for the administrative exemption from the overtime wage provisions of the Fair Labor Standards Act, the D.C. Circuit...more

How Franchise Systems Can Minimize Risks of Labor Violations

No one enjoys being the center of attention when that attention is coming from federal regulators. Yet that’s where franchise systems have found themselves of late – especially in the hospitality sector, which accounts for a...more

Legal Alert: Federal Courts Deal A Blow To DOL Regulatory Efforts

Recently, two different federal courts have invalidated statutory interpretations by the Department of Labor's Wage and Hour Division (WHD). ...more

Here's a Tip You Can Share: Federal District Court Strikes Down DOL Regulations Restricting Use of Tip Pooling Arrangements

Under federal and state wage-and-hour laws, tipped employees present unique compliance challenges for employers, particularly those in the restaurant and other service industries. Recent cases illustrate the potential risk....more

New York State Court of Appeals Backs Starbucks Policy on Tip-Pooling

Starbucks shift supervisors can legally participate in tip-sharing with other store employees, but the coffee chain’s assistant managers have enough managerial responsibility to disqualify them from sharing in customer tips,...more

Which Employees Can Have Their Hands in the Tip Jar? Finally Some Clarification

On June 26, 2013, the New York Court of Appeals issued a decision concerning who may lawfully participate in a restaurant tip-sharing system. The state’s highest court stated that for employees to receive tips from a...more

Restrictive Department of Labor tip credit and tip pooling regulations struck down

The Department of Labor’s regulation requiring that regardless of the amount of wages paid, tips were the property of the employees, has been struck down by a federal court....more

New York Court of Appeals Clarifies Important Questions about Tip-sharing Statute

On June 26, 2013, New York's highest court for the first time weighed in and ruled on what types of employees are qualified to participate in tip-splitting or tip-pooling arrangements under the New York Labor Law, as well as...more

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. ...more

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