Wage and Hour Law Update
D.C. District Judge Rules Tip Pool Participation Of Maitre 'd, Others Lawful Under FLSA
While the FLSA governs the payment of minimum wage and overtime, it does not by its statutory language regulate the receipt of gratuities. 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 (Some states impose this principle even if a tip credit is not taken, and the USDOL recently issued guidance indicating it is taking the same position, contrary to case law). Thus, participation in a “tip pool” (wherein members of the service staff pool all tips for a given day or shift and redistribute them according to a pre-determined formula) is limited to employees who hold a customarily and regularly tipped position, and who do not meet the test for an employer under the FLSA. In a new decision involving prominent Washington D.C. eatery Marcel’s, a Federal District Judge rejected plaintiffs’ claims that the maitre ‘d who participated in the Marcel’s tip pool did so in violation of the FLSA. Arencibia v. 2401 Rest. Corp., 2011 U.S. Dist. LEXIS 146979 (D.D.C. Dec. 21, 2011).
Plaintiffs alleged that Adnane Keiblar, the Restaurant’s long-standing maitre ‘d, should have not received tips because, in addition to his regular functions as maitre d’ where he was “responsible for organizing reservations, supervising the floor, ensuring the staffs' uniforms are clean, and generally accommodating the requests of guests, including seeing that ‘regulars’ are seated at the tables they request,” he also exercised managerial authority rendering him an “employer” under the FLSA. The Court rejected this assertion by analyzing the four principal factors identified by courts in making this analysis, namely whether the individual had the authority to: hire or fire employees; set employee schedules; set employee compensation; and maintain employment records. The court also rejected claims that the restaurant’s director of sales should not have participated in the Marcel’s pool (even though she in fact did not), because her “direct interaction with customers to arrange private events” rendered her a properly tipped employee.
Hospitality industry employers have been besieged by lawsuits and extensive regulation, including numerous challenges in New York and many other states as to the tip pool participation of various service positions outside of the universally understood tipped positions of server, and bus boy. Arencibia joins several other recent decisions which have rejected the narrow reading plaintiffs urge, which would limit tip pool participation to a small handful of titles not reflective of the versatile diverse nature of the hospitality industry workforce, particularly within the fine dining community. Employers must carefully analyze their tip pool participants under both federal and state law. At all times, the employer must ensure that state law permits tip pooling and also be able to support its position that each participant is both not a manager and regularly involved in customer service.