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California Court Of Appeals Upholds Restaurant Tip Pooling;
All Employees In Chain Of Service May Share In Tips

NEWPORT BEACH, CALIFORNIA, SATURDAY, MARCH 28 2009 - In a class action filed in Los Angeles Superior Court certain servers employed at Gyu-Kaku Restaurant claimed that the practice of tip pooling violated Section 351 of the California Labor Code. The Superior Court dismissed the lawsuit and on Friday, March 27, 2009, the Court Of Appeals For The Second Appellate District Affirmed That Ruling In Etheridge V. Reins International California, Inc., Court Of Appeal Of The State Of California, Second Appellate District, Division Three, Case No. B205005.

The Court of Appeals ruled that tip pooling does not violate Section 351 of the California Labor Code. That section of the Labor Code provides that gratuities or tips are the sole property of employees. 

The Plaintiffs in the case claimed that in order for any tip pool to be valid under the Labor Code any person permitted to receive a tip had to provide direct table service to customers. In other words, a bartender who prepared a drink but did not bring it to the customer at a table should not receive any tip, while if a bartender prepared a drink and brought it to the table, then that person could participate in the tip pool. The Court of Appeals rejected the Plaintiffs’ argument. The Court stated: “tip pooling is not illegal when the participants in the tip pool contribute to the patron’s service, even if not providing direct table service.”

The Court gave as an example of the illogical result which would ensue from a direct service requirement for participation in tip pools:

“While, in some restaurants, the duties of bussers include filling water glasses, bringing rolls and butter, clearing the table between courses and pouring coffee, it is certainly not always the case that patrons receive direct service from bussers.  At some restaurants, servers handle the coffee; at many restaurants, water conservation is practiced and water is not delivered unless requested; at some meals, there are no rolls and butter; in some circumstances, all of the food is served at once, and the busser does not clear the table until after the patron departs.  But a “direct table service” limitation would allow a busser to participate in a tip pool if the busser clears the plates while the patron is still seated at the table, but not to participate if the busser waits until after the patron has departed.  The work is the same; the next patron still starts his dining experience with an equally clean table, but the busser who cleans between patrons would be barred from participating in the tip pool because he does not personally interact with any patrons.  This illogical result casts doubt on any “direct table service” requirement.”

Rather, than adopt a direct table service requirement, as urged by the Plaintiffs, the Court of Appeals instead endorsed a “chain of service” approach. Under the chain of service rationale, as the Court noted “Dishwashers and other kitchen staff are encouraged to give their best possible service as they know they will participate in the financial rewards if the customers are pleased with their work, even though the customers do not personally see them doing it.  And a mandatory tip pool makes certain that these employees receive their fair share when the patrons are pleased with their service, but have no way to tip them directly.” The tip pooling system adopted at Gyu-Kaku restaurants permits all employees to share tips in a way that is directly proportional to their contribution to the totally dining experience of restaurant customers. It is that fair and equitable approach which the Court of Appeals endorsed in this case.


Russell Thomas

Also See: Restaurant Pays $112,702 in Back Wages After U.S. Department of Labor found Managers Participating in Tip Pool / January 2003
Waiter, There's a Service Charge On My Soup; Making Sense Out of a Service Charge / August 2005



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