On February 13, 2012, the federal district court for the Middle District of Tennessee granted conditional certification of a class action case under the Fair Labor Standards Act (“FLSA”) against Coyote Ugly saloons. As reported by Law360, the court conditionally certified several distinct classes, the most interesting of which is all employees who “worked as bartenders, barbacks, or waitresses at any company-owned Coyote Ugly saloon at any time within the last three years who were required to contribute their tips to a “tip pool” in which security guards also participated.” Under the FLSA, an employer may take a “tip credit” against the minimum wage owed to employees. That is, an employer may pay a tipped employee $2.13 an hour under the FLSA (note that the amount of the tip wage can vary by state or local law), and then rely on the tips received by a server to make up the difference between $2.13 and the minimum wage. (If the tips received by the employee are insufficient to bring the employee’s compensation up to minimum wage, the employer must make up the difference.)
The FLSA also permits a “tip pool”; that is, an employer may require servers to contribute a portion of their tips to a tip pool and then pay out the funds in the tip pool to other employees who “customarily and regularly” receive tips (See Wage and Hour Fact Sheet #15: Tipped Employees under the Fair Labor Standards Act). Such a rule immediately reveals the nature of the challenge in complying with the FLSA regulations regarding a tip pool. If the employees “customarily and regularly” received tips directly, they wouldn’t need to be in a tip pool! The regulations and case law have gradually come to define an employee who “customarily and regularly” receives tips as an employee who participates in directly providing service to the customer – such as the hostess at the front door and perhaps a busboy or bartender (as opposed to the dishwasher in the “back of the house”.) One of the factors used to determine whether an employee may be paid out of the tip pool is the extent to which they have any “face-to-face” contact with the customer. See Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294 (6th Cir. 1998).
Continue Reading Do Bouncers Provide Customer Service? The Challenges of Tip Pooling