Expect to Hear News on Tip Pool Lawsuit by Early Fall

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Expect to Hear News on Tip Pool Lawsuit by Early Fall

On Jan. 19, 2017, the National Restaurant Association submitted a petition to the U.S. Supreme Court challenging the Department of Labor’s prohibition on including back-of-the-house employees in employer-mandated tip pools. We do not yet know when, or even if, the Supreme Court will take up review.

As background, you may recall that in February 2016, the 9th Circuit Court of Appeals decided to uphold the DOL’s rule in National Restaurant Association et al. v. U.S. Department of Labor et al. However, its decision is on hold at least until July 10, which is the deadline the Supreme Court gave to DOL to respond to the NRA’s petition. After that date, the Court decides if it will hear the case.

Restaurateurs should not wait until July 10 to evaluate what is at stake with tip pools. Attorney Bob Donovan reminded members in a webinar earlier this year that an individual employee could still file a private lawsuit against an employer over tip pool practices even while DOL enforcement is stayed. If the employee were to prevail, there could be a significant lookback period. And “if the DOL rule stands, it is also uncertain if restaurateurs would have a solid defense to exemplary damages if employees claimed that their tips were unlawfully pooled during this period of uncertainty,” adds Attorney Catharine Morisset of Fisher & Phillips LLP.

If the Supreme Court refuses to hear the case, the DOL rule will stand, meaning that employers cannot pool all tips and redistribute them among both traditionally tipped and non-tipped employees. This means, for example, that kitchen employees and expediters must be excluded from mandatory tip pools unless they regularly engage in direct customer service.

Employers should also know that regardless of the legal outcome at the Supreme Court, including any employees who were not directly tipped by the customer, such as owners, managers, or kitchen staff in any mandatory tip pool comes with its own set of risks under Washington law. I-1433, the voter-approved statewide minimum wage initiative, expressly states that an employer “must pay” all tips “to its employees.” The regulations on this new law are not yet final, but at a minimum, it likely means that employees cannot be required to share tips with owners or non-exempt managers.

Learn more about the tip pool legal challenge and alternatives to tipping on our resource page here. For more specific questions, members are encouraged to consult with their own legal counsel. The Washington Hospitality Advisory Network can also connect members to a free, 30-minute consultation with an attorney.


This article is not intended as legal advice. Please consult your employment attorney for guidance on your specific situation. Catharine Morisset is a partner in Fisher Phillips’ Seattle office. Her practice focuses on representing local and national employers in litigation in state and federal courts, on appeal, and also before the EEOC and similar state agencies in all aspects of workplace law. You can reach her at cmorisset@fisherphillips.com or visit www.fisherphillips.com for more information.


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