Tip-Sharing Policies Upheld

Spring 2009Newsletters California Update - Second Quarter 2009

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A purported class of restaurant servers recently lost a lawsuit alleging that a restaurant tip-pooling policy violated the California Labor Code and unfair business practice laws. The tip-pooling policy at issue required servers to share their tips with kitchen staff, bartenders and other employees that did not directly server customers. The case is Brad Ethridge v. Reins International California Inc., Second Appellate District case number B205005.

The California appellate court affirmed the dismissal of this case on the grounds that the Labor Code did not prohibit such a tip-sharing policy as long as the tips were not shared with management. The appellate court reviewed the history of the relevant Labor Code sections, as well as prior case law, which held that tips belong to all employees who participated in service, not just the wait staff. The court explained that patrons tip based on a multitude of factors including food presentation and special food requests, things which are not related to table service. The court also reasoned that a tipsharing policy is supported by “common sense and fairness, and protects the public, the employees and the restaurant employer.”

This case is a win for employers and employees alike. By allowing a portion of tips to be shared with non-wait staff, the court helps to ensure that all employees are fully compensated for their work.