Weekly Tip-Pooling Policy Doesn’t Violate California Labor Code


By Joanne Deschenaux April 16, 2018

A coffee shop's policy of pooling tips on a weekly basis and distributing them to service employees based on the number of hours each employee worked that week—regardless of whether the employees worked busy shifts or slower shifts—did not violate California law, the California Court of Appeal ruled.

Section 351 of the California Labor Code, which prevents employers from taking tips intended for employees, does not authorize lawsuits for arguably unfair or unreasonable tip-pooling policies, the court said.

International Coffee operates retail stores under the name The Coffee Bean & Tea Leaf. The plaintiff worked as a server at a store in Rancho Cucamonga. Customers at the stores may leave tips in a tip jar. At the close of business each day, a shift supervisor collects the tips in the jar. The supervisor then places the tips in a deposit box in the store safe.

[SHRM members-only toolkit: Complying with California Wage Payment and Hours of Work Laws]

International Coffee does not require supervisors to count the tip money collected each day. Nor does it require them to count or segregate the tips collected during each of the three daily shifts.

Instead, at the end of each week, the supervisor counts the tips collected throughout the week and distributes the tips to tip-eligible employees. Thus, the supervisors commingle the tip money from 21 different shifts. Each tip-eligible employee receives a proportionate share of the tips based on the number of hours he or she worked that week.

The plaintiff filed suit, alleging that this practice violates Section 351 of the California Labor Code. He argued that by failing to count and segregate the tips left on more profitable days and shifts, International Coffee is taking tips from the employees who worked those days and shifts and giving them to employees who worked less-profitable days and shifts.

The plaintiff acknowledged that tip pooling in general, as long as it is fair and reasonable, does not violate Section 351. But, he argued, International Coffee's specific policy involves taking tips from some employees who earned them and redistributing them to others who did not earn them, which is unfair and unreasonable.

International Coffee moved to dismiss the lawsuit, and the trial court granted the motion. The plaintiff appealed, and the appellate court affirmed the dismissal.

'Unfair' Tip Pooling  

Tip pooling is the practice by which tips left by patrons at restaurants and other establishments are shared among employees, the court first noted. In the restaurant business, employer-mandated tip pooling is a long-standing practice.

Section 351 does not expressly address tip pooling or tip sharing between employees, the court said. Rather, the statute prohibits certain conduct by employers. It states, "No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron." The court said that Section 351 was enacted to prevent an employer from pressuring an employee to give the employer tips left for the employee.

The court next noted that several California court decisions have approved tip-pooling policies and concluded that they do not violate Section 351.

In this case, the plaintiff argued that the specific type of intershift tip pooling that International Coffee used did violate the law because it unfairly took some of the tip money from employees who worked the busier shifts and redistributed it to employees who worked slower shifts. The court, however, rejected this argument, noting that nothing in the law precludes the sharing of tips between employees—even if some employees consider the particular arrangement unfair.

Davis v. International Coffee and Tea, Calif. Ct. App., No. E066700 (April 3, 2018).

Professional Pointer: As of March 24, 2018, California employers may include back-of-the-house employees, such as dishwashers or cooks, in any tip-pooling arrangements.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.


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