The "Tip Pool" Just Got Larger

June 11, 2009
In our March 27, 2009 edition of The Personnel File, we addressed two recent cases involving tip pooling. "Tip pooling" involves the practice whereby tips left by customers at a table directly serviced by one employee are required, by the employer, to be pooled and shared with other employees. One case, Budrow v. Dave & Buster's of California, Inc. (2009) 90 Cal.Rptr.3d 239, upheld tip pooling for "front-of-the-house" employees other than direct table servers. The other case, Grodensky v. Articoke Joe's Casino (2009) 91 Cal.Rptr.3d 732, upheld pooling among card dealers, chip sellers, board persons, and floor managers of tips left by players at a casino gambling table. However, tips could not be shared with shift managers because they were viewed as "agents" of the employer.

Shortly after that edition of The Personnel File, another California Court of Appeal division issued a decision holding that "back-of-the-house" employees may share in tip pools when tips are left at a customer's table. Another recent Court of Appeal decision held that shift supervisors were among the class of employees for whom a tip was left for by customers of a popular coffee chain.

Back-Of-The-House Employees May Share In Tip Pools

In Etheridge v. Reins International California, Inc. (2009) 91 Cal.Rptr.3d 816, waiters brought a class action against a restaurateur for unfair business practices, alleging the restaurateur's policy of requiring waiters to tip out (i.e. share a portion of their tips with) bartenders, kitchen staff and dishwashers violated Labor Code section 351. Labor Code section 351 provides in part, "No employer or agent shall collect, take, or receive any gratuity or part thereof that is paid, given to or left for an employee by a patron...Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for."

The Court upheld the tip pooling among not just bartenders, but also kitchen staff and dishwashers. The Court relied upon a previous Court of Appeal decision, Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062, which stated, in part, "...the average diner has little or no idea and does not really care who benefits from the gratuity...as long as the employer does not pocket it, because he rewards for good service no matter which one of the employees directly servicing the table renders it...The public leaves a tip for those employees who actually service the table, and has a right to expect that those employees receive the gratuity to the exclusion of the employer." (Leighton, supra, 219 Cal.App.3d 1069-1070.)

The Court expanded upon Leighton's "direct table service" language and rationale to include any employee who "contribute[s] to the patron's service, even if not providing direct table service." This decision has opened the door to allow tip pooling among back-of-the-house employees, a group who has not traditionally been viewed as eligible to participate in the tips left by customers at tables.

Shift Supervisors Seen As Among Employees For Whom A Tip Is Left

In Chau v. Starbucks Corporation (2009) --Cal.Rptr.3d--, 2009 WL 1522708, a "barista" brought a class action lawsuit against the coffee house chain alleging unfair business practices for violation of Labor Code section 351. Starbucks had a practice whereby tips left in the communal tip container on the counter were divided among the baristas and the shift supervisors at each store, pro rata, based upon the number of hours worked by each of those employees in the week.

The evidence showed shift supervisors performed all of the same tasks as baristas, including making coffee drinks, operating the cash register and taking orders. Shift supervisors, however, were also responsible for supervising and coordinating employees within the store, opening and closing the store and depositing money in the safe. Shift supervisors were distinguished from store managers and assistant store managers who do not normally perform the same tasks as baristas and who are charged with recruitment, hiring, promotion, making schedules, discipline and termination of employees.

The barista focused on the language at the beginning of Labor Code section 351 which states, "No employer or agent shall collect, take, or receive any gratuity or part thereof that is paid, given to or left for an employee by a patron". The barista claimed the shift supervisors were "agents" of the employer. The Court of Appeal, however, decided the matter based upon the second portion of Labor Code section 351, which reads, "Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for." The Court noted shift supervisors and baristas work side-by-side performing tasks as a team. The tip container is a communal container whereby customers do not intend to leave the tip for just one employee, but for all employees the customer believes to be taking his or her order, preparing the drink, and serving the food (i.e. "behind-the-counter" service employees). Thus, the Court found the customer intends to leave the tip for both baristas and shift supervisors. The Court noted the statute seeks to prevent the public from being deceived when leaving tips for employees. "It would be inconsistent with the purpose of the statute to require an employer to disregard the customer's intent and to instead compel the employer to redirect the tips to only some of the service personnel."

The Court did not decide whether the shift supervisors are "agents" of the employer, because it was irrelevant to the decision. If the customer intends to leave the tip for a specific employee or employees, those employees are entitled to keep or share those tips so as not to commit a fraud upon the customer.

Conclusion

Employers are permitted to institute policies which require tips left by customers at tables to be shared with other non-management employees, including back-of-the-house employees, even if they do not provide direct table service. In addition, where communal tip jars are used by employers, all employees providing behind-the-counter service to the customer may participate in the sharing of the communal tips if it is reasonably perceived the customer intends to leave the tip for those employees.

This article was written by and Frances Rogers, an attorney with the labor and employment law firm of Liebert Cassidy Whitmore. Ms. Rogers (frogers@lcwlegal.com) is an Associates in the Fresno office and can be reached at (559) 256-7800. For more information regarding the discussion above or on our firm please visit our website at www.lcwlegal.com, or contact one of our offices below.

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