In February 2016 the Ninth Circuit issued a decision affirming that back of house employees are prohibited from participating in mandatory tip pools. Oregon Rest. & Lodging Ass’n v. Perez (9th Cir. 2016). The Department of Labor has consistently and firmly taken this position, even prior to this recent decision. Back of house staff are largely unseen by the public and they include cooks, expediters, and dishwashers.
Employers who want to include back of house staff in mandatory tip pools could face claims by a server or another person in the “chain of service” that they should have received a larger portion of the tips and were denied earnings during the time the pool was in effect. Employers consequently face significant exposure if their tip pool policy is found to be non-compliant.
The situation may be complex for employers that already have tip pools in place that include back of house staff. If the employer insists on allowing back of house staff to participate, the employer may attempt strategies such as instructing back of house personnel to provide direct table service so that the back of house employees become more integrated within the “chain of service.” An example of this would be requiring the cooks to come out of the kitchen to greet guests and “touch the table.” However, the conservative and defensible approach is to restructure the company’s tip pooling policy to comply with this new determination.
As a final important note, the guidance on permissible distribution of tip pools states that servers should receive 80-85% of total tips. A conservative approach would ensure that the total amount distributed to personnel other than servers does not exceed 20%.
If you have any questions about your obligations or compliance as an employer, please contact us at info@mitzelgroup.com or reach out to your Mitzel Group, LLP attorney directly.
