Tip Pooling

February 26, 2010 – Wilsonville, OR

Could Be A Reality In Oregon And Washington Soon

The Oregon and Washington Restaurant Associations just received word that the Ninth Circuit Court of Appeals handed down a ruling on a tip pooling case. The case MISTY CUMBIE v. WOODY WOO, INC. could allow for tip pooling in Oregon and Washington.

This case, once the decision becomes final, will change the way the US Department of Labor enforces tip pooling laws in states like Oregon and Washington that do not allow tip credits.

The District Court provided optimism in this case, based on statements made by Judge Paul Papak during the District Court ruling, that could be extremely beneficial and relevant to ALL Oregon restaurants, giving clarity to the muddled question of tip pooling or sharing in Oregon and the inability of the use of a "tip credit."

Judge Papak specifically stated, "In a state such as Oregon, where state law prevents tip credits, an employer is not prohibited from requiring employees to share tips with each other, whether or not they are customarily tipped employee, so long as the employer does not take, keep or use the money to pay employees the minimum wage owed to them."

Judge Papak interprets the tip pooling rules listed by the Fair Labor and Standards act to only be applicable if a tip credit is in use. He specifically writes, "Because the 'valid tip pool' restrictions are applicable only where the tip credit provision is implicated, the FLSA restricts tip pooling arrangements only where employers seek to claim a tip credit."

The case was appealed to the US Circuit Court, which is very important from a legal perspective. The US Department of Labor does not have to apply the ruling of a District Court, but does have to apply the ruling of a Circuit Court. Now we have to wait to see if it gets appealed to the full Appeals Court or the US Supreme Court.

There have been other District Court rulings in Pennsylvania, (Cooper v. Thomason), and one other case in the Oregon Court system which brings to light the real possibility that Oregon and Washington may not be far from changes to our law with regard to mandating that tips be pooled and shared with employees who do not deal directly with guests. The Cooper case was one in which an employee sued her employer for several things, including requiring all tipped staff pool their gratuities.

The money collected was distributed among all employees – whether direct service or not. There was a tip pooling expectation outlined at hiring as a condition of employment, though they had no written agreement. Several key elements led the Pennsylvania court to their decision in support of the employer’s pooling policy, including the fact that the business elected not to use a tip credit (employee hourly wage below state or federal minimum and tips applied to ensure minimum met), even though that is allowed in Pennsylvania.

While we believe that if tip pooling is allowed by this court case, it is advisable for a restaurant to have a written agreement with their servers delineating the terms of a tip pooling agreement; however it is not necessary as long as it is consistently applied.

The parties in the Cooper matter did not have a written agreement regarding tip pooling. However, the lack of a written document does not preclude the Cooper parties from having a valid tip pooling agreement.

The court did not specifically address managers involved in tip pools, so the restaurant associations are not recommending pools that would be extended to management staff, but it did not expressly prohibit the practice. Watch closely for the ruling to be finalized in future restaurant association publications; this case could be a big victory for the few states that do not allow the use of the federal tip credit.

For more information please contact Oregon Restaurant Association at 503.682.4422 or email Bill Perry, VP of Government Affairs, bill@ora.org