Fifth Circuit Rules that Tip Pooling Arrangement is in Violation of the FLSA

As a general rule, the Fair Labor Standards Act (FLSA) requires employers to pay a minimum wage of $7.25 per hour to employees, but that amount is reduced to $2.13 per hour for tipped employees, so long as the tips earned cover the differential. Furthermore, employers may not pay the $2.13 per hour unless “all tips received by [the] employee have been retained by the employee” with the exception of “pooling of tips among employees who customarily and regularly receive tips.” (29 U.S.C. § 203(m).)
On September 14, 2011, the Fifth Circuit addressed the issue of whether food “expediters” or “quality assurance” workers at Chili’s Restaurants fall within the category of employees who customarily and regularly receive tips so as to permit them to take advantage of the tip pooling practice. (Roussell v. Brinker Int’l Inc., No. 09-20561 (5th Cir. September 14, 2011).)
In Roussell, waiters and waitresses claimed that they were coerced into sharing tips with the “expediters” and “quality assurance” workers—employees who inspect completed food orders from the kitchen, garnish plates and delegate to servers and bussers the delivery of the food to the customers—in violation of the FLSA. Notably, the Department of Labor’s Field Operations Handbook provides:
[I]t does not appear that the Congress, even in requiring as a general principle that tipped employees retain all their tips, intended to prevent tipped employees from deciding, free from any coercion whatever and outside of any formalized arrangement or as a condition of employment, what to do with their tips, including sharing them with whichever co-workers they please.
(Department of Labor Field Operations Handbook § 30d04(c) (Dec. 9, 1988) (emphasis added).)
Thus, the relevant inquiry became whether Chili’s Restaurants operated a legal tip pool—the determination of which hinges upon: (1) whether the “expediters” and “quality assurance” workers were tip eligible; and (2) whether the managers coerced the servers to share their tips with the “expediters” and “quality assurance” workers. The Fifth Circuit held that Chili’s Restaurants violated the FLSA on both grounds because the workers at issue were not regularly or customarily tipped, and the “decision” to share tips with the “expediters” and “quality assurance” workers was not free from coercion.
It is highly recommended that employers review their tip pooling policies to ensure compliance with the relevant provisions of the FLSA.


1 comment:

  1. TIP pooling has been defined under CFR 531.52 as the pooling of "money belonging to an employee which he may use as he chooses free of any control of the employer".

    Federal laws prohibit employers from requiring or mandating a tip pool. The explicite defining of tips and tip pools under federal regulations make this point perfectly clear.

    29 USC Section 203(m) states,
    Nothing in this subsection shall be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.

    What must be understood is that the law is not, and would not be suggesting, that tip pools are limited to certain types of employees, those who customarily and regularly receive tips.

    Instead the law is stating that nothing in the subsection shall be construed to prohibit an employee who customarily and regularly receives tips from pooling tips as money beloninging to him which he may use as he chooses free of any control of the employer.

    When tip pooling is properly understood as the pooling of money belonging to the employee, it is easy to understand that Section 203(m) is not attempting to determine who can be included in a tip pool.

    Only the employee who is choosing to use his tips for a tip pool would be authorized to determine who is eligible to participate in his tip pool.

    The truth of the matter is, federal regulations explain clearly that the determination of whether a tip pool is legal does not hinge on who is included, but rather, solely on whether the employee is freely choosing to use his tips for a pool that is in no way controlled by his employer.