A recent case from the federal court in Orlando provides a reminder that sharing pooled tips too widely could violate the Fair Labor Standards Act and expose the employer for failing to pay the minimum wage. In Rubio v. Fuji Sushi & Teppani, Inc., a former server sued the restaurant where she had worked for failure to pay the minimum wage because the restaurant included chefs in the tip pool.
Like many restaurants, the employer in Rubio relied on a tip credit, which allows the employer to pay the employee, directly, less than the minimum wage, so long as the tips the employee receives supplements the employee’s pay to equal or exceed the minimum wage. (In Florida, the minimum wage for 2013 is $7.79 per hour, and employers must pay tipped employees a direct wage of at least $4.77 per hour.) The employer in Rubio also had a tip pool. Under the FLSA’s rules, a tip pool may only include customarily tipped employees. If the employer takes a tip credit in connection with a tip pooling arrangement, the tip credit is only valid if the tip pool includes only those employees who customarily and regularly receive tips. In other words, the employer will lose the tip credit and violate the FLSA if the tip pool includes employees who would not normally be characterized as tipped employees. The issue in Rubio was whether the chefs were properly included in the tip pool. The court looked at the legislative history of the FLSA, Department of Labor internal guidance, and cases from other jurisdictions and concluded that chefs were not tipped employees under the FLSA and should not have shared in the tip pool. Because the chefs shared in the tip pool, the restaurant violated the FLSA and would have to pay the minimum wage to the employee for all the hours she worked, less the money the employer already paid to her directly.
In deciding that chefs were not tipped employees, the court considered that chefs do not regularly interact with customers, unlike servers, buspersons, foodrunners, hosts, or even sushi chefs. The interaction that chefs had with customers was rare and incidental. The court concluded that the chefs did not provide the kind of service to customers in a way that warranted a share of the gratuity left by the customer.
The improper inclusion of non-traditionally tipped employees in a tip pool has become a focal point for FLSA lawsuits in the last year or so. Employers who rely on tip credits using a tip pooling agreement should ensure that only those employees who customarily receive tips are allowed to participate in the tip pool.