As discussed here, Section 3(m) of the FLSA (like many state laws) places restrictions on which employees within a workforce can receive and share in tips. While the FLSA permits tip pooling “among employees who customarily and regularly receive tips," litigation in the hospitality industry often centers around the legality of tip pool participation by restaurant employees other than the universally-accepted categories of waiters and busboys. On March 7, a Federal District Court in Chicago provided an expansive interpretation of “tipped employee.” Turner v. Millennium Park Joint Venture, LLC, 2011 U.S. Dist. LEXIS 22295 (N.D. Ill. Mar. 7, 2011).
Turner addressed Plaintiff’s contention that, as a server, he should not have been required to contribute $3 from his daily tips to a dedicated “silverware roller,” who rolled silverware into a napkin for place settings. Interestingly, in 2006, prior to Plaintiff’s hire in 2008, the defendant restaurant – Chicago’s Park Grill –held a vote in which the servers unanimously voted to use a silverware roller to do this work in lieu of the servers, and to provide the silverware roller with a portion of their tips.
Plaintiff argued that an employee could only be one who “customarily and regularly receives tips” if that employee had direct customer contact. Id. at * 6-7. The Court rejected such a narrow reading, interpreting 3(m) to require only what it states: namely that an employee can be eligible for the tip pool “if that employee receives tips, either directly from customers or from other employees who themselves receive direct customer tips, on a regular basis.” The Court further noted that the arrangement with the silverware rollers was voluntary on the part of the servers, and thus did not run afoul of the spirit of DOL regulation 29 C.F.R. § 531.54. The Court provided further practical guidance and observation regarding the appropriateness of tip pool participation by employees assisting servers in the front-of-the-house service enterprise:
in real world terms it is readily understandable that employees receiving tips directly from customers may agree to share tips when they believe that the employees with whom they share help them to serve the customers better and more fully and thus to obtain additional tips and sweeten the pot for everyone. Just so with a silverware roller, who performs work that would otherwise be a waitperson function. Little wonder, then, that the Park Grill servers not only voted for the hiring of such personnel but gave management a standing ovation for acceding to that vote.
Finally, the Court held that Turner’s individual, explicit assent to the tip pool arrangement was not required for it to be upheld as lawful. Rather, “the very nature of the parties' employment relationship is such that no individual employee's separate agreement to the established arrangement was necessary to hold plaintiffs to it. Instead the agreement was implied from the fact of plaintiffs having been hired with that across-the-board understanding in place, in much the same way that an existing collective bargaining agreement binds new hires into the bargaining unit.”
Turner is a significant victory for employers operating tip pools which include positions not contemplated by outdated DOL regulations, particularly those within Illinois and the Seventh Circuit. Hospitality employers – arguably the most popular target for wage-and-hour lawsuits – must continue to be vigilant in assessing their wage and tip practices under the FLSA and state law.
