National Restaurant Association Seeks Review Of Tip Pooling Rule

Saul Ewing Arnstein & Lehr LLP

On January 19, the National Restaurant Association (“the Association”) asked the U.S. Supreme Court to review a Department of Labor (“DOL”) rule that prohibits “tip pools,” the sharing of tips among “front of the house” staff (i.e., servers and bartenders) and “back of the house” staff (i.e., cooks and dishwashers).

The Association asked the Supreme Court to step in to resolve a circuit split regarding whether the DOL has the authority under the Fair Labor Standards Act (“FLSA”) to regulate tip pooling practices. The Ninth Circuit held last year that the DOL does have authority to restrict sharing of tips with kitchen staff, while other courts have found that the DOL exceeded its authority in issuing the rule. The Fourth Circuit ruled to the contrary, holding that the tip credit provision of the FLSA does not extend to employers that choose not to take a tip credit.

The FLSA permits restaurants to take a tip credit against minimum wage. This means that restaurants can pay customarily tipped employees [those who make more than $30 per month in tips] less than minimum wage when the difference between the cash wage and the minimum wage is made up through tips. The statute prohibits restaurants that take a tip credit from requiring tipped employees to share their tips with back of the house staff, but is silent on tip pooling or sharing arrangements when the restaurant does not take the tip credit.

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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