Source: https://flsaovertimelaw.com/2011/03/21/d-md-employer-owner-could-not-share-in-employee-tip-pool-under-flsa-regardless-of-extent-of-his-bartending-activities/
Timestamp: 2019-04-25 00:45:38+00:00

Document:
In this case tipped employees challenged the validity of the employer’s tip pool, due to the participation of “non-tipped employees” in the tip pool. The case was before the court on a variety of motions. Of significance here, the parties moved by cross motions for summary judgment on the issue of whether the defendant’s tip pool arrangement was valid or not. The court held that the owner-operators participation in the tip pool necessarily rendered it invalid, notwithstanding the fact that he regularly bartended side by side with his tipped employer bartenders. In doing so, the court rejected the defendant’s argument that an owner-operator, who earns primarily tips, can transform himself into a tipped employee, such that he may permissibly participate in a tip pool with other tipped employees.
“As previously mentioned, the Fair Labor Standards Act was enacted to eliminate “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” Pub.L. No. 75-718, 52 Stat. 1060 (1938) (codified as amended at 29 U.S.C. §§ 201 et seq.). To effectuate this aim, the FLSA requires that employees be paid a minimum wage of $7.25 per hour. 29 U.S.C. § 206(a)(1)(c). An exception exists for “tipped employees.” “Tipped employees” are those employees that are “engaged in an occupation in which [they] customarily and regularly receive[ ] more than $30 a month in tips.” 29 U.S.C. § 203(t). Those employees are required to receive at least the minimum wage, but their employers are permitted to pay a direct wage of $2.13 per hour and then take a “tip credit” to meet the $7.25 per hour minimum wage requirement. 29 U.S.C. § 203(m). In other words, an employer satisfies the FLSA if he pays his tipped employees at least $2.13 per hour, and that wage, in conjunction with the tips they receive, make up at least the $7.25 per hour minimum wage. Employees are permitted to share tips through a tip pooling or tip splitting arrangement so long as each employee customarily receive more than $30 per month in tips. 29 C.F.R. § 531.54. However, “[i]f tipped employees are required to participate in a tip pool with other employees who do not customarily receive tips, then the tip pool is invalid and the employer is not permitted to take a ‘tip credit.’ “ Wajcman v. Inv. Corp. of Palm Beach, 620 F.Supp.2d 1353, 1356 n. 3 (S.D.Fla.2009) (citing 29 U.S.C. § 203(m)). In the present case, the bartenders at the Taverns participated in a collective tip pool that was divided up according to a formula that accounts for the hours worked by each bartender.
Mr. Zink worked as a bartender at the Taverns and concedes that he participated in the tip pool. Mr. Zink also concedes that he satisfies the definition of “employer” under Section 203(d) of the FLSA. See Defs.’ Cross Mot. Summ. J. at 24, ECF No. 51-1. Both parties agree that bartending is typically a tipped occupation. Where the parties disagree, however, is on the question of whether an “employer” may also be a “tipped employee” and receive a share of the tip pool. Defendants argue that despite his status as an employer, Mr. Zink is nevertheless permitted to share in the tip pool because he can simultaneously be an “employer” and a tipped “employee” under the FLSA. In other words, because Mr. Zink works as a bartender, a position that ordinarily receives tips, his status as an employer is immaterial to the FLSA analysis. Plaintiffs respond by arguing that allowing Mr. Zink to simultaneously benefit from the “tip credit” exception to the minimum wage requirements and at the same time personally receive tips would be completely contradictory to the purpose behind the FLSA. Plaintiffs maintain that Mr. Zink, as the sole owner of the Taverns, and the Plaintiffs’ employer, simply may not participate in a tip pool, and that to the extent he did participate in a tip pool, that tip pool is invalid under the FLSA. In short, the question before this Court is to what extent, if any, an owner-employer who also tends bar is permitted to receive tips from an employee tip pool.
This precise question is an issue of first impression in this District and in the Fourth Circuit, but not elsewhere. Every court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participating in employee tip pools. “Congress, in crafting the tip credit provision of section 3(m) of the FLSA did not create a middle ground allowing an employer both to take the tip credit and share employees’ tips.” Chung v. New Silver Palace Restaurant, Inc., 246 F.Supp.2d 220, 230 (S.D.N.Y.2002); see also, e.g., Morgan v. SpeakEasy, LLC, 625 F.Supp.2d 632, 652 (N.D.Ill.2007) (quoting Chung, 246 F.Supp.2d at 230); Ayres v. 127 Restaurant Corp., 12 F.Supp.2d 305, 308-09 (S.D.N.Y.1998) (finding tip pool invalid as a result of general manager’s participation); Davis v. B & S, Inc., 38 F.Supp.2d 707, 714 (N.D.Ind.1998) (“an employer is not eligible to take the tip credit, and will be liable for reimbursing an employee the full minimum wage that employee would have earned, if the employer exercises control over a portion of the employee’s tips”).
Click Gionfriddo v. Jason Zink, LLC to read the entire order.
By Andrew Frisch in Tips on March 21, 2011 .
How can it be understood that te FLSA prohibits employers from sharing in a tip pool but does not prohibit employers from setting up, mandating and controlling the tip pool. What does share in a tip pool mean?
Lets put it this way. What would be the difference between someone taking a share of the money in your billfold and someone spending the money in your billfold?
The way it stands, an employer cannot take a share of the tip pool he is requiring but he can direct where the money will go. What this means is that while employers are prohibited from shaing in a pool they have required, they can decide how the money is spent.
My point is, it’s a lie to say that employers aren’t shaing in the pool when they require tip pooling. How can it be said that an employer isn’t sharing in the pool when he requires that all his employees adhere to how he wants the tips spent.
What most people fail to realize is that tip pooling is the spending of money. When an employer requires a tip pool he is requiring how the tips will be spent. When one determine how the tips are spent, he is not only sharing in the tips, he is taking possesion of the tips.
Employer are telling their waiters that they must share a part of their tips with other workers and yet we have liars in this country suggesting that controling tips in such a manner isn’t the same as sharing in the tips. It’s all about deceiving the public into believing that employers aren’t stealing their worker’s tips when they require tip pooling. Tip pooling has become a con job whereby employers steal the customer’s tips without them actually realizing that the employer is stealing their tips Our goverment is aiding employer with this con job by suggesting that our courts and government are making sure employers don’t share in the tips customers are presenting their employees.

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