While many state laws regulate the distribution of gratuities (as well as service charges and other fees), the overwhelming judicial view, as originally set forth by the Ninth Circuit in Cumbie v. Woody Woo and joined by district courts in other jurisdictions, holds that an employee’s right to tips under the FLSA flows exclusively from the tip credit provision 29 U.S.C. § 203(m).  In other words, employers who do not take a tip credit are free, under the Woody Woo interpretation of the FLSA, to distribute or retain gratuities as they see fit.  Although the Department of Labor now disagrees, another new decision adds to the consensus.  Brueningsen v. Resort Express, 2015 U.S. Dist. LEXIS 9262 (D. Utah Jan. 26, 2015).

Joining his colleague Judge Ted Stewart, Judge David Nutter of the District of Utah, applying Woody Woo, ruled that gratuities given to drivers making runs between Park City and Salt Lake City Airport as part of ski packages did not belong to those drivers under the FLSA.  The Judge found that “the statutory language is clear. It gives employers the choice of how they will pay their employees a minimum wage—either by taking a tip credit or not. If employers take a tip credit to supplement and meet the minimum wage requirement, employees are entitled to retain all tips, unless there is a valid tip pool that distributes the tips among the employees. If employers do not take a tip credit, they must pay their employees the full hourly minimum wage because they are not using a tip credit to make up the difference between the employees earnings and minimum wage requirements.”

Tip litigation shows no sign of slowing, and employers must analyze their gratuity and service charge practices accordingly with consideration to applicable federal jurisprudence and state law.  The Woody Woo decision binds courts within the Ninth Circuit (CA, WA, HI, OR AZ, MT, ID and AK).