The FLSA and state law often both regulate the distribution of tips. See here. Under the FLSA, an employer can require all “customarily tipped employees” to pool tips generally or require a specific “customarily tipped employee” to share tips with another “customarily tipped employee.” Disputes often arise as to whether an employee is a “customarily tipped employee” – one who provides service to an establishment’s patrons – thereby permitting his or her inclusion in the tip pool. In a recent decision from federal court in Texas, Judge Xavier Rodriguez denied a plaintiff’s motion for summary judgment seeking a ruling that a service bartender—who prepared drinks which he then provided to defendant restaurant servers, not to patrons—should not have received a share of customer tips. Barrera v. MTC, Inc., 2011 U.S. Dist. LEXIS 83468 (W.D. Tex. July 29, 2011).
In Barrera, plaintiffs attacked Mi Tierra Restaurant’s requirement that servers “tip out” 2% of gross sales into a tip pool that was divided between bussers, hosts, counter servers and service bartenders. While the service bartenders were in sight of customers, customers could not order drinks directly and, correspondingly, the bartenders did not receive tips directly. While observing that “front of the house” employees often are the only employees who share in tip pools, the Court, based on an analysis of the legislative history of Section 203(m) of the FLSA (addressing the FLSA’s tip credit and the customarily tipped employee requirement) and an analysis of industry custom, held that it was a factual issue as to whether the service bartenders in could be considered “customarily and regularly” tipped. In denying summary judgment, the Court compared the service bartender position to that of busboy, a position authorized to receive tips by 29 C.F.R. § 531.54.
As the Barrera decision highlights, hospitality establishments with tipped employees may have a tipping practice which does not necessarily correspond to a universally acknowledged “industry custom.. In such situations, the establishment must be prepared to defend its practice. See Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294 (6th Cir. 1998) (hostesses) and Myers v. Copper Cellar Corp., 102 F.3d 546 (6th Cir. 1999) (salad preparers). As wage and hour litigation continues in the hospitality industry, industry employers must continue to regularly review their practices for compliance with federal and applicable state law.