The Supreme Court Could Soon Decide the Fate of Tip Pooling in America

The Restaurant Law Center wants the Supreme Court to overturn the existing Labor Department regulation and allow tips to be pooled with back-of-the-house employees.

Jan 23 2017, 6:00pm

Photo via Flickr user Steve Snodgrass

The practice of tipping is in flux all across the country. In New York City, restaurateur Danny Meyer has famously eliminated tipping in his restaurants, including the seminal Union Square Café, and workers are compensated by raising menu prices and wages for all employees. Dozens of other restaurants are adding service charges to all bills, and some are giving customers the option to tip back-of-the-house employees.

But now an organization of restaurant owners is asking the Supreme Court to hear a case—Oregon Restaurant and Lodging, et al v. Perez, et al. —that challenges an existing Labor Department regulation regarding tipping. The regulation in question says that tips can be pooled, but only among employees who "customarily and regularly receive tips"—like waiters, bussers and bartenders—and not among those who don't—meaning dishwashers, cooks, chefs, and managers. Should the Supreme Court decide to hear the case, tipping—and working in a restaurant—throughout the United States could become very different indeed.

The rationale behind the existing tip-pooling rule is that waiters, bus people, and bartenders are allowed earn less than minimum wage because their tips are, in effect, credited to their salary. Cooks, dishwashers, and the like (i.e., those who don't get tipped) must earn minimum wage. As Sean Chesley, a commentator and Oklahoma attorney, puts it, "The tip-sharing rule is technically limited to covering the minimum wage."

But now, a newly formed organization that represents restaurant owners and their interests, the Restaurant Law Center, wants the Supreme Court to overturn the existing Labor Department regulation—and allow tips to be pooled with back-of-the-house employees.

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Why would a bunch of restaurant owners want tips to be pooled with back-of-the-house employees, you ask?

Waiters groups are saying it is because restaurant owners would prefer BOH compensation to come out of waiters' tips and not out of the restaurateurs' pockets. Restaurant owners say they should have the right to determine compensation within their own businesses without government interference.

Right now, the law says that tips are the property of the employees who receive them—not the restaurant. Restaurant owners say that allowing tip pooling among all restaurant employees would even out the disparity of pay between the front-of-the-house workers (who in many states—but not all—earn less than minimum wage, but typically make more per hour thanks to tipping) and the back-of-the-house workers (who earn at least minimum wage with no tips).

The Restaurant Law Center, which represents the National Restaurant Association—again, a bunch of restaurant owners—also claims the rule that bans tip pooling is a form of overregulation of business by government; they say restaurants should have the freedom to control compensation of their employees.

Restaurant employees—especially those who are tipped—disagree. Tipped workers have brought lawsuits claiming that forcing them to pool their tips with back-of-the-house employees is just a form of their employers stealing their tips from them; they say they don't want to subsidize chefs and dishwashers when those employees, who have a right to the minimum wage, should get paid by the restaurant owners themselves.

As always, there is not guarantee that the Supreme Court will agree to hear this case. But if the Court does consent, the way compensation works in restaurants may radically change across the nation.