A recent California appellate court opinion has substantially expanded the group of restaurant personnel who may participate in a mandatory tip pooling arrangement. Tip pooling is a practice where some of the tips received by tipped employees are shared with other restaurant employees. Under existing law and longstanding industry practice, restaurant servers pool their tips and distribute a portion of that money to bus persons, food runners and others who directly assist in serving the customer. Kitchen personnel and others are typically left out of such an arrangement.
In the case of Etheridge v. Reins International California, Inc. the court was asked to review whether it was permissible for a tip pooling arrangement to include others that helped in the chain of service, but did not directly service the restaurant patron. Included in this group were kitchen staff, dishwashers, and bartenders. The court answered the question in the affirmative.
The plaintiff in the case was employed as a server at a Gyu-Kaku restaurant. Like so many other restaurants, this one had a mandatory tip pooling policy requiring servers to "tip out" certain categories of employees who do not provide table service, including kitchen staff, dishwashers, and bartenders. The server contended that this policy violated state law governing such arrangements. Those rules declare that a tip is the "sole property of the employee or employees to whom it was paid, given or left for" and prohibit any employer or agent of the employer from taking any gratuity left for an employee by a patron. The server asserted that by requiring him to participate in the pool and share his tips with others, his employer essentially "took" a portion of his tips and then gave it to a group of employees for whom the tip was not left by the patron. He argued that the restaurant's rule was unlawful insofar as it gave a share of his tips to employees with no guest contact, like the kitchen and bar staff.
The court ruled that it was ok to allow anyone in the chain of service to participate in the tip pooling arrangement. In doing so, the court observed that patrons who elect to leave a tip are rewarding the overall experience, and not just the one or two persons with whom the guest had direct contact. According to the court, dishwashers and other kitchen staff are encouraged to give their best possible service because they know they will participate in the tips if customers are pleased with their work, even though the customers do not personally see them doing it. A mandatory tip pool like this one ensures that these employees receive their fair share when patrons are pleased with the restaurant's services, but have no way to tip them directly.
We probably haven't seen the last of this issue. Though the restaurant won the argument on the tip pool, two of the three justices who decided the matter stated that the case should be reviewed by the California Supreme Court or the state Legislature. Given these comments, we expect that the parties will ask the California Supreme Court to review this decision.
Your contact at the Firm is ready to assist you if you have any questions about the case or you wish us to review your job application to insure legal compliance.
