UnderCover Waitress: Tip Pools at Cafe Gratitude

Sunday, January 8, 2012

Tip Pools at Cafe Gratitude

One of the two lawsuits filed against the owners of Cafe Gratitude in California alleges illegal tip pooling practices.

A tip pool, in general, is a policy in which tipped employees put their tips into one big collection. The collection of tips is divvied out among workers at the end of the shift.

There are laws governing the use of tip pools, but state employment laws differ. To the best of my knowledge, every state is required to ensure that tipped employees make at least minimum wage. Technically, this means that waitresses should keep enough tips to cover the tip credit before contributing to the pool. I doubt it works out this way, at least in most cases.

California regulates restaurant employee labor more than other states. These regulations protect waitresses.

Since 1975, California Labor Code Section 351 has read:


* 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, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.

* Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for. 

* An employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company. Payment of gratuities made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment.

* In plain language, the tip credit in California is illegal. Waitresses must make a base wage that is at least equal to minimum wage.

* Tips are considered the property of the tipped employees. A "tip out" is a type of tip pooling in which waitresses are required to share tips with other workers. An example of a tip out is the waitress giving ten percent of her tips to the bussers or to a bartender. This is legal if those workers are in the direct chain of service. This refers to workers in the dining room, but not kitchen staff. I had one job, and only one, in which I was required to tip out the dishwasher. This may have been legal in that state and at that time (I am not sure,) but it is illegal in California.

* And third, the full amount of the credit card tip must be given to the employee for whom it was left. Some restaurant owners try to pay credit card fees out of tips. This is illegal in California, and grossly unethical and immoral anywhere.

* California law does not allow management to participate in tip pooling. Management may not keep any tips for themselves or for the establishment.

Tip pools are not mentioned in section 351. Whether or not tip pooling in California is legal seems to be unclear, as it continues to be handled by the courts on a case-by-case basis.

The court date for Sarah Stevens against Cafe Gratitude is set for August 6, 2012 starting at 9:30 AM. It will take place in the San Francisco Civic Center, Courthouse Room 206, with the honorable Judge Katherine Feinstein presiding over the case.

This will be interesting to follow.


  Your Rights in the Workplace is a necessary read for those who perform labor. Written by Barbara Kate Repa of the Nolo Press, this comprehensive guide should be on the bookshelf of anyone who has a job, has had a job, or may have a job in the future.

22 comments :

  1. I don't like tip pooling in cases where all the waitresses put their tips in a single jar and at the end of the evening they split it. Why is this okay? What if one waitress is 300 times faster and better than the others and gets tipped well? Also, there are those waitresses with bad attitudes that tell us they sure as hell don't want to be there serving you. Should they get equal the amount in tips as the better waitress?

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  2. I completely agree with you, Diane. Waitresses seldom wish to pool tips.

    I have voluntarily pooled tips on shifts during which we knew it would be extremely slow. That way, nobody is fighting to get a table that walks in. Had a shift once in one person was served. I am serious! The other waitress, with whom I get along well, and I chose to pool tips at the beginning of the evening. I took the first and only table, and at the end of the shift I gave her half. We have had good laughs over that shift.

    I con't think there is any other situation in which the waitresses would opt for tip pooling. Owners and managers sometimes set things up this way.

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  3. Interesting, I am reading these updates even though I have been quiet. I am curious to know which states have the strictest tip laws? And, does anyone know if the so-called family style serving restaurants who use a team of service people from taking the orders, servers, and buss persons - do they combine tips?

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  4. Hi, I am putting together a series of posts answering questions and explaining tip pools. Stay tuned... :-)

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  5. Actually, lots of waitresses are unaware of the laws governing tip pools and tip credits. My personal opinion is that plenty of employers like it that way, but I am a cynic.

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  6. Tips should be for the server who brings things out to the table in question, not for the less then competent one over at the other side of the room.

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  7. Tips are for the staff serving the tables, not for management and not for kitchen staff or dishwashers.

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  8. First of all, pretty much every restaurant in CA pays all employees minimum wage or more. There is no "tip credit" in California. Secondly, Cafe Gratitude employees got together and voted in their tip pooling agreement. I don't know her, but I'm sure the former server who wants her pooled tips back out of the pool knew about this very clearly from day one. Since Cafe Gratitude trains people to be servers that other restaurants simply would never hire to that position without previous experience, this lawsuit seems pretty far-fetched to me. I'd say that what the court decides on this case is a fairly open question.

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  9. As I wrote in the post, "* In plain language, the tip credit in California is illegal. Waitresses must make a base wage that is at least equal to minimum wage." There is no point in telling people that a tip credit in CA is illegal without describing what a tip credit is in the first place.

    An employer can not require that any employee vote away his or her rights. Therefore, if tip pools are used in an illegal fashion, but employees vote to break the law, they are still breaking the law. The law states who is responsible, and in this case, it is the employer. Even if the server knew that the policy of the restaurant was to break the law, the restaurant is still breaking the law. The law recognizes when somebody does not have bargaining power. A server who does not do what she is told is likely to get fired.

    I assume based upon your comments that you have experience with Cafe Gratitude, either as a customer or employee, and have a low opinion of the servers. Interesting.

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  10. Tip pooling is explained under federal law as something an employee cannot be prohibited from doing. Not as something employers cannot be prohibited from doing.

    29 USC, section 203(m), states that Nothing in this subsection shall be construed to prohibit the pooling of tips among employees who customarily and regulartly receive tips.

    While currently, many people are errantly interpreting this law as suggesting that employers cannot be prohibited from pooling tips "among employees who customarily and regularly receive tips" federal regulations, along with common sense, disprove such a notion.

    CFR 531.54 explains that "TIP POOLING" is where employees practice tip splitting. Where the waiters give a portion of their tips to the busboy. This same regulation goes on to explain that tip pooling is where employees mutually agree on the basis by which tips will redistributed through a tip pool and where employees give their employer an accounting of how tips are to be redistributed.

    Please note, federal regulations contradict and disprove the idea that tip pooling is something employers are allowed to do. Federal regulations do not state that tip pooling is where employers practice tip splitting. Tip pooling is not defined as where the employer gives part of the waiter's tips to the busboy. Tip pooling is not defined as where employers give an accounting of how tips will be redistributed throgh a tip pool. Tip pooling is not defined as where the employer determines the basis by which tips will be pooled.

    When an employer requires tip pooling, those employees being required to pool tips are subsequently unable to pool tips as defined under federa law. The waiters can't give a part of "their" tips to the busboy because their employer is basically saying that "their" tips don't belong to them and them alone. Instead, the employer is giving his waiter's tips to the busboys and other workers. Likewise, when an employer requires tip pooing, the employees are unable to mutually agree on the basis by which their tips will be redistributed through a tip pool because the employer is deciding such matters when he decides who such requirement will apply to.

    The truth of the matter is, federal laws are stating that nothing shall be construed to prohibit an employee who customarily and regularly receives tips from pooling his or her tips. The law is not suggesting that employers must be allowed to pool tips.

    However, this whole notion that federal laws allow employer to require tip pools stems from the idea that certain types of employees are entitled to a share of tips. Many people have asserted that employees who customarily and regularly receive tips have a legal right to any tips a customer presents, and as such, employers cannot be prohibited from pooling the tips so that all those employees who customarily and regularly receive tips get their share.

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  11. CONTINUED..

    In California, several judgees have supported the notion that certain types of employees are entitled to a share of any tip a customer presents by ruling that all those in the "line of service" are eligible to be included in a tip pool. The problem is, while the courts have suggested that certain types of employees are legally entitled to a share any tip a customer presents, the courts really don't have the authority to decide who each and every customer's tip belongs to. Eventually, a clever lawyer is going to challenge this ridiculous notion that judges have the authority to determine who the customer's tip belongs to.

    You see, when federal laws are misconstrued as suggesting that certain types of employees are entitled to a share of the customer's tip, then employer required tip pooling seems justified. When judges suggest that certain types of employees are entitled to a share of the customer's tip, then it makes sense to interpret the law as an allowance for employers to pool the tips their workers receive.

    However, the truth of the matter is, federal laws would not attempt to define who the customer's tip belongs to. Federal laws have no authority to appropriate the customer's tip in such a manner. Federal laws cannot be suggesting that certain types of employees are legally entitled to a share of each and every customer's tip, because federal laws would not have the authority to state who the customer's tip belongs to. Only the customer is legally entitled to determine who his tip belongs to.

    Likewise, judges have no authority to determine who the customer's tip belongs to. It is only a matter of time until the courts are challenged over this idea that a judge has the authority to determine who the customer's tip belongs to.

    California labor laws which concern themselves with tips state,

    The Legislature expressly declares that the purpose of this
    article is to prevent fraud upon the public in connection with the
    practice of tipping and declares that this article is passed for a
    public reason and can not be contravened by a private agreement. As a
    part of the social public policy of this State, this article is
    binding upon all departments of the State.

    What this law is stating is that judges, along with all other department of the state, are prohibited from fraudulently suggesting that it is the right of judges, rather than the public, to determine who the public's tips belong to. Again, it is only a matter of time until some sharp lawyer puts these California judges in their place.

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  12. @Anonymous, thank you very much for taking the time to write such a detailed explanation of the laws surrounding tip pooling.

    All too often, I think what the law says and what employees are told to do by employers are two different things.

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  13. While in California tips are considered the property of the tipped employees, plural, please note that California labor code 356 supports a different interpretation of tips.

    Under 356, I would argue that tips are the property of whom ever the customer chooses to tip, NOT, tips are the property of the "tipped employees" as determined by the judges of California.

    This whole chain of service idea just reeks of deceit. How can any judges in his right mind suggest that he knows who each and every single customer intended to tip?

    The only way to logically and honestly regard tips is that they belong to which ever individual they where physically handed to. After that point, there exists no evidence to substantiate who the tips belong to.

    If tips don't belong to the person to whom they have physically been handed, then how can anyone determine who the tips actually belong to?

    For instance. If a waitress is given a $10 tip, how do you substantiate things like, what portion the waitress is entitled to keep for herself, which other workers should receive a portion and what portion each should get. It's an impossible task to guess at who the customer wanted his tips shared with and what portion each should have.

    Basically, you either view tips as that which belongs to the employee to whom it was given, or that which cannot be substantiated as belonging to anyone.

    California wants tips regarded as that which cannot be substantiated as belonging to anyone. That way, California labor code 351 will cease to prevent employers from taking the tips given to an employee. How can a law prohibit an employer from taking his employee's tips when California views tips as that which cannot be substantiated as belonging to anyone?

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  14. What many people in California want us to believe is that tips belong equally to all those who work in the chain of service. The problem is, they don't have any proof to back it up. Only the customer knows who his tip belongs to. The idea that tips belong equally to each worker in the chain of service is exactly the fraud 356 speaks of.

    Isn't it fruad for a judge to suggest that he knows who each and every customer's tip belongs to? How can a judge honestly suggest that he can read the minds of each and every customer and determine that the tips where intended for all those in the chain of service?

    The only way to prevent fraud upon the public in connection with the practice of tipping is to make sure that everyone understands that it is the right of the customer to determine who his tip belongs to. Any other understanding of tipping would be fraudulent.

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  15. When I tip out a busser, i.e., give the busser a percentage of my tips, I am doing so because without her help I would not have taken as many tables nor made as much money. However, I do think waitresses are often taken advantage of and expected to compensate many people so the restaurant owner can save on payroll.

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    1. Forcing workers to tip out other workers is a blatant attempt by employers to benefit themselves to their worker's tips. Those employers who require their waiters to tip out other staff are spending their waiter's tips. Instead of using their own income to pay their payroll expenses, employers who require tip outs are using their employee's tips to supplement their payroll expenses. It's nothing but stealing. It is illegal. Don't believe otherwise. Lies cannot cover up the truth.

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    2. Tip outs are not intrinsically illegal. I depends upon who is being tipped out and in which states. Some states mandate that tipped out employees must work in the front of the house, and not be management.

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  16. What about this?....
    I'm a Small Business Owner that Ran a Small Cafe with just my Business Partner for a year and a half. We had many customers suggest that we put some sort of tip jar out, so they can tip us for our friendly services and awesome food/drinks. We're both ex-salesman and know the power of over the top service.
    I recently bought out my business partner and hired a couple of employees to help me out at the Cafe. We all participate in the making of food, drinks and maintaining the Cafe. There is no set role for each employee. Being that I'm the Sole Propietor now and that have a couple of employees. What is the fair/legal way for me to allocate these tips. I should mention that I personally work 60-80 hours a week and these employees work anywhere from 8-35 hours a week. Plus there are many hours throughout the day were I don't have employees assisting me. I run the place by myself. What do you think? I've read all the "Tip Pooling" Laws for Restaurants, but it just doesn't seem relevant to my scenario. I'm very generous with the tips and love to help make money for my people. I know for a fact that the majority of the tips are intended for me personally, based on my relationship with the customers and my dedication to their friendly service. I just want to be fair to my employees.

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    1. Hi, and thank you for writing.

      The short answer: You are not a sole proprietor. You have employees. The rules of the game changed when you hired employees. I don't know what state you are in, but I personally would argue that any and all tips made when employees are working belong to the employees. Period. However, I will research this a little more and write a blog post on this very issue. You bring up sound points that make excellent food for thought and are important aspects of the "great tip debate." :-)

      If you don't mind letting me know what state you do business in, then I can offer a more specific answer. But of course, only if you want to.

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  17. Can you imagine the guy next to you at work giving up a portion of his wages to pay yours? Happens at my job EVERYDAY. It's called tip pooling or tip sharing.

    Together we can move the President of the United States to consider abolishing tip sharing for food servers in American. I have started a petition to abolish tip sharing/tip pooling. Please take a few minutes and sign it. This is your chance to improve the lives of millions of Americans. https://petitions.whitehouse.gov/petition/abolish-tip-pooling-american-food-servers/WJrwCk8x

    Abolish "tip-pooling" for American food servers. | We the People: Your Voice in Our Government petitions.whitehouse.gov

    Abolish "tip-pooling" for American food servers. | We the People: Your Voice in Our Government petitions.whitehouse.gov

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  18. I have been a Server for many years.. It bewilders me that some Employers want to mandate a Tip-out based on the Servers Sales for the day, The Problem with this is on a 6 hour shift, 1/2 of that time on the clock there is no other person on the floor "ie" no busser/hostess simply myself and the cook, Yet at the end of my shift I'm expected to leave $3 per every hundred dollars in sales for the Busser/s who where only there for half of less of my total shift This is not fair but the Employer is constantly asking/telling me I need to make sure I leave the percentage in the register wrapped for the tip-out?

    I'm pretty confident this is not Legal, Also, to touch on another subject, Why is it that Servers pay taxes on 100% of tips on each paycheck, yet the mandated Tip-out is not reflected as a deduction... Seriously? If we are required to tip out and also to claim the total tips on our paycheck, Why isn't it a Law the amount tipped out to the tip pool is not deducted? Why should the server pay taxes on money we didn't keep for ourself? I believe the Laws need to change so that if a Restaurant Employer wants to demand we share tips, It's only fair that the Busser/Hostess/s should also have to pay taxes on the amount of tips they received for each pay period. Basically Severs Are paying taxes on money that went to a different employee. Employers should be required by law to deduct the tipped out total for the pay period and add the income to to Busser /hostesses income for them to pay the Taxes on.

    Who's with me on this? 

    I'm betting if it was a Law that Employers keep track of every penny of Tip-outs from all Servers and had to be reflected to the penny on each of the Chain of Service employees our tips actually went to, You would see a drastic change in attitude of Employers and even the other workers we share tips with if they had to pay taxes on the money we gave them, on their paychecks which would be less since they have never had to claim the income. 

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