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Tip-pooling (or tip-sharing) is common practice in the food and beverage industry. Many  restaurant owners and managers require waiters to share 10-30% of their tips with certain employees. California and federal courts have traditionally recognized that it is not illegal to require wait stuff to share their tips with bartenders, bussers, food runners, and host persons, because  (1) they  “customarily and regularly receive tips,” and  (2) they are not employers.

 But what about a restaurant  Maître d’ (or Banquet Manager) whose job responsibilities include  “organizing reservations, supervising the floor, ensuring the staffs’ uniforms are clean, and generally accommodating   the requests of guests?”
In  Arencibia v. 2401 Rest. Corp., Plaintiffs, who were waiters, argued that such Maître d’ was not qualified to participate in  the tip-pooling arrangement because he exercised managerial duties. However, the District Court for the District of Columbia disagreed and held that the Maître d’ could participate in the tip pooling,  because he  did  not have sufficient supervisory authority to be considered an “employer” under the FLSA.

Unlike California Labor law (Section 351) , Federal law does not have a specific counterpart statute that addresses a tip-sharing policy. However, section 3(m) of the FLSA (29 U.S.C. § 203(m)) requires that employees paid pursuant to the “tip credit” provision (i.e., paid less than the standard minimum wage of $7.25 due to receipt of gratuities), retain all of their tips or share them only with employees who are customarily and regularly tipped and who do not qualify as a “employer” under the FLSA.

In determining whether the Maître d’ was an employer, the District Court looked at  the following four factors:  (1) authority to hire and fire employees; (2) authority  to supervise and control work schedules or the conditions of employment; (3) authority to determine the rate and method of payment; and (4) authority to maintain  employment records.

Reviwing the facts of the case, the court found  the following:

·         The Maître d’s “continuous monitoring” of employees was not necessary to classify him as an employer.

·          Just because the Maître d’ interviewed applicants and made recommendations to the general manager, it did not mean that he had  authority to hire, fire, suspend, or discipline employees. It was the general manager who made the final determination in hiring and firing employees.

·         Drafting the initial schedule did not make the Maître d’  an employer because  all vacations had to be approved by the general manager.

·          (1) printing  out the daily reports and giving  them to the office; (2) marking  off who worked on the relevant nights; (3) indicating which bussers and food runners would receive extra tips; (4) indicating  who received directed tips; and (5) disbursed cash payments on Fridays are none-discretionary, clerical tasks that did not give the Maître authority to decide  who receives extra tips and at what rate each employee.

Based on these findings, the District Court concluded that the Maître d’ did not exercise sufficient authority or desecration to be considered an employer. While this is not an appellate decision, it is still  a valuable authority because it  provides a clear framework for determining an employment status  of employees who are delegated certain limited managerial duties.

California employers should keep in mind that this case was decided by a federal court and the issue whether the Maître d’ could share tips with wait staff was reviewed under  federal law, specifically,  the FLSA. California courts apply a different set of factors and most of the decisions regarding tip-pooling policies are made on a case-by-case basis. If you have a specific question regarding a tip-pooling policy at your work place, feel free to contact me. I am a San Francisco employment and labor law attorney and  will be happy to meet you for a free consultation.

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