Tip-sharing is caring…

Unless you work in the back

Consulting with employment counsel is the most common advice for Restaurateurs after the Ninth Court of Appeals February 23, 2016 decision.

Their decision states tipped-employees are not required to share tips with non-tipped employees. The Department of Labor (DOL) defines a tipped employee as “employees who customarily and regularly receive more than $30 per month in tips.” These employees must also have customer service interactions with the tipping customers.

Professor of labor law at UC Hastings, Reuel Schiller, said, “The premise is the tip is never the employer’s. The employer doesn’t have the power to take that from the waiter and give it to a dishwasher because it’s not the employer’s money.”

The new Ninth Circuit ruling mainly impacts back-end restaurant workers. Businesses are unclear on how and if their current policies should change. With rightly concerned and overly cautious Restaurateurs, creative compromises are in consideration.

Some restaurants are nixing the tipping system altogether. If this becomes standard practice, most employers will have to raise menu prices to pay their staff a living wage.

However, in a city like San Francisco where average rent is $3,400—and headlines have been made regarding a $508 monthly rent for an 8×8 foot pod—paying a living wage isn’t necessarily possible.

Other businesses have considered adding gratuity to the bill so the employer owns the tips instead of the employee, but the entire purpose of the new ruling is so the employees own the tips and not the employer. This is definitely a grey area.

Some employers are having their cooks and dishwashers serve food to interact with tipping customers despite a disturbance in efficiency. This way the back-end workers adhere to the DOL’s definition of a tipped employee.

Even with the DOL’s definitions to help bring clarity amongst an ambiguous new policy, there are still many unanswered questions. Thus, we have come full-circle: When there is tip sharing, restaurateurs should consult with employment counsel.