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News | Sep 18, 2014

ANOTHER COURT HOLDS THAT A RESTAURANT’S IMPROPER TIP-POOLING ARRANGEMENT WHICH DISTRIBUTED TIPS TO BACK OF THE HOUSE EMPLOYEES VIOLATES THE FLSA

The District Court for the District of Maryland recently granted summary judgment on behalf of a plaintiff seeking to recover unpaid wages under the Fair Labor Standards Act (“FLSA”).  See Mould v. NJG Food Serv., 2014 U.S. Dist. LEXIS 111510 (D. Md. Aug. 12, 2014).  In that case, the plaintiff was employed at a restaurant named the “Crab Bag.”  During his employment as a Server, plaintiff was paid a substandard minimum wage of $3.63.  The restaurant used a tip-credit to avoid paying plaintiff the full minimum wage on account of the tips plaintiff received from patrons.  However, plaintiff alleged that the restaurant could not use a tip-credit because of the restaurant’s policy which required him to share a portion of his tips with other employees such as cooks, crab steamers, and prep cooks.  Plaintiff’s argument was that under section 203(m) of the FLSA, the restaurant was prohibited from pooling tips to other employees who do not customarily and regularly receive tips themselves.

Thus, plaintiff alleged that the restaurant’s tip-pooling arrangement which distributed tips to cooks, crab steamers, and prep cooks was illegal and forfeited the restaurant’s use of a tip-credit.  As a result, plaintiff alleged that he should have been paid the full minimum wage for all of his hours worked as a Server.

To determine whether the restaurant’s distribution of plaintiff’s tips to other employees was proper, the Court looked at the job duties of the employees participating in the tip pool.  The Court held that the other employees participating in the tip-pool at best had very limited direct contact with patrons.  The Court stated:  “In sum, at best, some of the kitchen staff occasionally had limited contact with customers. However, it is also clear that those cooks, crab steamers, and prep cooks who were not on ‘counter help’ duty abstained from any direct intercourse with diners, worked entirely outside the view of patrons, and solely performed duties traditionally classified as food preparation or kitchen support work.”

Unfortunately, restaurants throughout Pennsylvania, New Jersey and New York routinely violate the FLSA’s strict rules regarding tip-pooling arrangements.  Current and former tipped employees employed as Servers or Bartenders often do not realize that their employer violated the law in distributing their hard-earned tips to “back of the house” employees such as chefs, kitchen staff, dishwashers, runners, expos or expediters, or even members of management.

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