On March 27, 2009, in Brad Etheridge v. Reins International California, Inc., No. B205005, the Second Appellate District of the California Court of Appeal approved a mandatory tip-pooling policy that allows participation of kitchen staff. The court rejected all wage and hour claims by a class of waiters arguing that kitchen staff cannot participate in a tip pool. Given the ruling in Etheridge, California restaurant employers with mandatory tip pooling policies would be well advised to review, and if necessary, amend their policies.


Background

California Labor Code section 351 provides that tips are the sole property of the employee to whom it was paid and not the employer or manager. The general rule of thumb for the restaurant industry is that tips are for waiters to be shared with bussers and bartenders. The waiters provide the service and hence share in the majority of the tips. At most restaurants, the waiters then tip-out the bussers and sometimes the bartenders.

Many times there were arguments among waiters, bussers, and bartenders as to how much was to be shared — with bussers and bartenders reacting to the cheap waiter. In order to resolve these issues, many employers implemented mandatory tip-pooling policies. Under the terms of these policies, all tips are pooled and then shared by a pre-determined percentage. Waiters have challenged this practice and alleged that mandatory tip pooling violates Labor Code section 351. In previous California Court of Appeal decisions, the waiters lost that battle.



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