Waitress Claims That Tip Pool Violates FLSA

were not wages under the flsa because woo did not take a tip credit. see tends that the tip-pooling arrangement was permissible so d.c., filed a brief on behalf of the nevada restaurant associ- [10] cumbie acknowledges that the applicability of the 2897cumbie v. woody woo, inc. 2885 regulations issued under the fair labor standards act, 73 fed. reg. 12 appeal from the united states district court create such an entitlement where no tip credit is taken. absent employees--regardless of whether her employer claims a tip pools, cumbie maintains that a department of labor ("dol") erty of the person in recognition of whose service it is presented by the received the minimum wage `free and clear,' and the money regulation elucidates the meaning of the term "pay" in such tion as amicus curiae in support of the appellees. riott corp., 549 f.2d 303 (4th cir. 1977). in other words, the employers is our duty to give effect, if possible, to every clause and word bie's tips via a section 203(m) tip credit (with the added bene- iii opinion by judge o'scannlain pool" that was redistributed to all restaurant employees.3 [13] the supreme court has made it clear that an employ- contributions to the pool did not, and could not, reduce her ment to turn over or to redistribute tips is presumptively valid. of a "valid" tip pool involving only customarily tipped retain all of her tips because of her participation in the pool. accord 29 c.f.r. � 531.52 ("in the absence of an agreement to the oregon law forbids tip credits. see or. rev. stat. � 653.0355(3). greater than the minimum wage, it requires its wait staff to department of labor regulations governing tips are still valid, we note that see 29 u.s.c. �� 203(m), 206(a)(1) (1996). long as it paid her the minimum wage, which it did. neous and unworthy of any deference,13 wage, the servers received a portion of their daily tips. jon m. egan, lake oswego, oregon, argued the cause for the for the southern district of iowa, sitting by designation. to redistribute her tips that was not barred by the flsa. pay a tipped employee an amount equal to (1) a cash wage of the additional amount on account of tips may not ruled williams, rendering tip-redistribution agreements pre- 39 (1955) (internal quotation marks omitted). therefore, we the secretary of labor has not bothered to amend them in over forty years. sumptively invalid. however, we cannot reconcile this the misty cumbie, on behalf of herself woo, inc., woody woo ii, inc., and aaron woo (collectively, see auer v. robbins, exceed the value of the tips actually received by an affirmed. her, cumbie disavowed reliance on it in her reply brief and at samuel p. mcmullen and erin mcmullen, snell & wilmer tences provide that an employer may take a partial tip credit ment practice does not violate the flsa unless the flsa oregon's minimum wage, which at the time was $2.10 more 1938 ("flsa"), 29 u.s.c. � 201 et seq.4 [11] here, such an agreement existed by virtue of the tip- we use the term "server" to include the waiters and waitresses serving the flsa by requiring her to contribute a greater percentage of her tips nition of "wage" recognizes that under certain circumstances, cumbie also asserted several wage-and-hour violations under oregon would prefer to receive all of her tips, but the flsa does not least $2.13, but if the cash wage is less than the federal mini- minimum wage was $5.85 per hour, see 29 u.s.c. � 206(a)(1)(a). d.c. no.woody woo, inc., an oregon 3:08-cv-00504-pkcorporation, dba vita caf�; ment to subsidize the wages of its non-tipped employees. the 4 credit, we perceive no basis for concluding that woo's tip- this title. circuit judges, and charles r. wolle,* wage in effect under section 206(a)(1) of received, they cannot be deemed under federal law to have v. tiffany english pub, inc., 597 f.2d 464 (5th cir. 1979); richard v. mar- paul j. papak, magistrate judge, presiding departure from the plain language of the statute." ingalls achieve y does not mandate that a person must do x, period. mum, plus a substantial portion of her tips. naturally, she 2 1 pool brought her cash wage below the federal minimum in the filed february 23, 2010 lant. with him on the brief was stefano moscato, national except that this subsection shall not be construed to accordingly, woo was not entitled to take a tip credit, nor did it. see richard v. marriott corp., 549 f.2d 303, 305 (4th cir. by sentence. the first sentence states that an employer must still valid and what level of deference they merit. see metro leasing and such employee have been retained by the employee, 841 f.2d 337, 339 (9th cir. 1988). uted to cumbie from the pool ever belonged to her, and her although we ordinarily begin our analysis with the text of venes "court decisions and the unequivocal statutory language." updating no. 08-35718v. tions were intended to be freestanding requirements. of course, "we do appellant and filed briefs. timely appealed. 203(m)'s conditions). (2) an additional amount on account of the the reasonable cost of board, lodging or "other facilities" furnished to for the district of oregon b on the brief were jesse a. cripps, jr. and ann s. robinson, customary, the tips, in the absence of an explicit contrary interpretation with the plain text of the third sentence, which are not enough to meet the minimum wage, the employer transfer of tips actually originates in the minimum wage sec- must inform the employee of the tip-credit provisions in sec- diverted into the invalid tip pool is an improper deduction tips are the property of the employee absent a "valid" tip pool, credit. essentially, she argues that section 203(m) has over- [3] we shall unpack this dense statutory language sentence gon, argued the cause for the appellees and filed a brief. than is "customary and reasonable." however, we have no reason to dis- 11 flsa purports to restrict employee tip-pooling arrangements it could have done so without reference to the tip credit. "it 838 (w.d. pa. 1995), aff'd without opinion by platek v. duquesne club, the wage specified in paragraph (1) and the 2895cumbie v. woody woo, inc. oral argument, claiming instead that "[t]he rule against forced employers of "tipped employees" may include part of such staff for woo's benefit, in violation of the free-and-clear regu- tences do not apply (i.e., the employer may not take a tip credit provision is clear, we need not decide whether these regulations are 5 the district court from wages that violates section [20]6 of the act." prohibits it. christensen v. harris county, 529 u.s. 576, 588 bie's reading of the flsa is correct only vis-�-vis employers t_faq_min-wage2008.shtml (last accessed jan. 3, 2010), and the federal freestanding requirements pertaining to all tipped employees. united states court of appeals same way as the tools in the regulation's example. the secre- woo required its servers to contribute their tips to a "tip we must decide whether a restaurant violates the fair at least $2.13,9 employee by the employee's employer shall be an cumbie also argued that even if woo's tip pool were legal, it violated did not receive the full federal minimum wage plus all tips pooling arrangement violated section 203(m).12 2889cumbie v. woody woo, inc. (2000). having concluded that nothing in the text of the money saved in wage payments is more money in woo's credit) unless two conditions are met. first, the employer in those cases took a tip credit, which is not the scenario we confront here. provisions of this subsection, and all tips received by woody woo ii, inc., an oregon opinion pay a tipped employee, the amount paid such and answers, available at http://www.oregon.gov/boli/ta/ law but has abandoned them on appeal. see collins v. city of san diego, was $7.95, see or. rev. stat. � 653.025(e); minimum wage: questions tion 203(m). second, the employer must allow the employee corporation, dba delta caf�; labor standards act, when, despite paying a cash wage the federal minimum wage minus such cash wage.10 august 20, 1996; and amount equal to-- when no tip credit is taken. therefore, only the tips redistrib- customarily tipped in the restaurant industry. the remainder wage delivered to the employee." 29 c.f.r. � 531.35. the the relevant statute, we pause to elucidate a background prin- employment lawyers association, san francisco, california. wages" at the prescribed minimum hourly rate. id. � 206(a). imposes any "statutory interference" that would invalidate this issue in her favor, but the cases she cites are inapposite, as they amendments to the flsa, see pub. l. no. 93-259, � 13, 88 stat. 55 [7] here, there is no question that woo's tip pool included dismissed cumbie's complaint for failure to state a claim 6 pooling arrangement. the flsa does not restrict tip pooling minimum. even assuming cumbie's tips belonged to her ab initio, they [9] while section 206 does not mention tips, let alone tip brings us back to section 203(m), which we have already 1024 n.10 (9th cir. 2004). imposes conditions on taking a tip credit and does not state o'scannlain, circuit judge: absence of an explicit contrary understanding" that is not oth- gibson, dunn & crutcher llp, los angeles, california; and an employer must pay a tipped employee a cash wage of at (1974), to support their contention that section 203(m)'s tip-credit condi- conclusion that the flsa does not prohibit woo's tip-pooling frieden. contrary between the recipient and a third party, a tip becomes the prop- i 1 of first impression in this court.7 arrangement does not thwart this purpose. cumbie received a counsel "free and clear" regulation provides as an example of a pro- eugene scalia, gibson, dunn & crutcher llp, washington, brief were carol a. de deo, steven j. mandel, and paul l. 2891cumbie v. woody woo, inc. to the kitchen staff. understanding, belong to the recipient. where, however, wage that was far greater than the federally prescribed mini- (between 30% and 45%) was returned to the servers in pro- valid" tip pool constituted an indirect kick-back to the kitchen hibited kick-back a requirement that an employee purchase late section 206 by way of the "free and clear" regulation. tion. see id. because woo did not claim a "tip credit,"5 2 employees' tips as wage payments. see id. � 203(m). the required to be paid such an employee on be "paid finally and unconditionally or `free and clear,' " and grams, 519 u.s. 248, 261 (1997). the purpose of the flsa 2896 cumbie v. woody woo, inc. 519 u.s. 452, 461 (1997), and conclude that woo did not vio- 2894 cumbie v. woody woo, inc. it con- determined does not alter the default rule in williams that tips tary of labor agrees, asserting that "if the tipped employees neither woo nor any managers participated in the tip pool. the first part of section 203(m) allows employers to include in wages which prohibits kickbacks that reduce the wages paid below the federal portland, oregon, which is owned and operated by woody the statute is not implicated here. aaron woo, an individual, must "top up" the cash wage. collectively, these two sen- before: diarmuid f. o'scannlain and n. randy smith, the secretary's interpretation of the regulation as plainly erro- gress." her argument, as we understand it, is that woo is which for purposes of such determination mum wage, the employer can make up the difference with the than the federal minimum wage.2 agree with the secretary that the "customary and reasonable" requirement, cumbie and amici rely extensively on legislative history of the 1974 an ambiguity or an irreconcilable conflict with another statu- cumbie filed a putative collective and class action against a cash wage at or exceeding involve employers who satisfied their entire minimum-wage obligation out 13 employee has been informed by the employer of the shall be not less than the cash wage ment to woo's practice. accordingly, the judgment of the dis- [12] even if cumbie were correct, "we do not find [this] 43654, 43660 (july 28, 2008). accordingly, we decline to recognize any cumbie suggests that various courts of appeals have already resolved of tips. see, e.g., doty v. elias, 733 f.2d 720 (10th cir. 1984); barcellona "[a]s a practical matter, it nullifies legislation passed by con- forbids any " `kick[ ]-back' . . . to the employer or to another see 29 u.s.c. � 206(a)(1). 3 (1942) (internal citations omitted) (emphasis added).6 kevin h. kono, davis wright tremaine llp, portland, ore- for the ninth circuit trict court is (1) the cash wage paid such employee ington, d.c., argued on behalf of the secretary of labor as erwise prohibited. 315 u.s. at 397. hence, whether a server at the time cumbie filed her complaint, the minimum wage in oregon for publication portion to their hours worked. shipbuilding, inc. v. dir., office of workers' comp. pro- [1] williams establishes the default rule that an arrange- a at any rate, because we conclude that the meaning of the flsa's tip maria van buren, united states department of labor, wash- senior district judge. refers to the regulation which requires that the minimum wage customer."). although the parties and amici debate whether this and other statute, he gets no [tip] credit."). since woo did not take a tip and all others similarly situated, woo, alleging that its tip-pooling arrangement violated the 107 f.3d 863 (3d cir. 1997). in a tip pool with other customarily tipped employees. is to protect workers from "substandard wages and oppressive a way as to prohibit woo's tip-pooling arrangement. she belong to the servers to whom they are given." this question [5] cumbie argues that under section 203(m), an employee that is, tory provision, "we will not alter the text in order to satisfy amount is equal to the difference between under federal rule of civil procedure 12(b)(6), and cumbie or overtime wages required to be paid him under the act." id. in determining the wage an employer is required to non-customarily tipped employees, and that cumbie did not belong to the servers to whom they are given only "in the ii possibility . . . so absurd or glaringly unjust as to warrant a finally, cumbie argues against the result we reach because [2] under the flsa, employers must pay their employees to keep all of her tips, except when the employee participates largest portion of the tip pool (between 55% and 70%) went ciple that guides our inquiry: "in businesses where tipping is functionally taking a tip credit by using a tip-pooling arrange- [4] the third sentence states that the preceding two sen- lation. as she sees it, the money she turned over to the tip texas, filed a brief on behalf of the national employment 2893cumbie v. woody woo, inc. ation as amicus curiae in support of the appellees. with him its reference to the tip credit, as well as its conditional lan- participate in a "tip pool" that redistributes some of their tips employees under certain circumstances. 29 u.s.c. � 203(m). this part of employee. the preceding 2 sentences shall not apply customarily and regularly receive tips. person for the employer's benefit the whole or part of the when no tip credit is taken, we perceive no statutory impedi- "woo"). woo paid its servers1 opinion tory interference, no reason is perceived for its invalidity." working hours." barrentine v. ark.-best freight sys., inc., lawyers association as amicus curiae in support of the appel- flsa provides in relevant part:8 misty cumbie worked as a waitress at the vita caf� in 2888 cumbie v. woody woo, inc. a statute that provides that a person must do x in order to such requirement. see kilgore v. outback steakhouse, 160 f.3d 294, 302- laf v. united states, 510 u.s. 135, 147-48 (1994). 9 minimum-wage provisions of the fair labor standards act of mon coal co., inc., 534 u.s. 438, 462 (2002). eric a. lindenauer, garvey schubert barer, portland, ore- tipped employees," 29 u.s.c. � 203(m), it was "invalid" 8 guage and structure, superfluous.11 450 u.s. 728, 739 (1981) (citing 29 u.s.c. � 202(a)). our according to cumbie, her forced participation in the "in- development corp. v. comm'r of internal revenue svc., 376 f.3d 1015, on appeal, cumbie argues that because woo's tip pool 10 id. in addition to this cash with respect to any tipped employee unless such plus (2) an additional amount in tips equal to which appears only in opinion letters, a handbook, and a fact sheet, contra- a minimum wage. see 29 u.s.c. � 206(a). the flsa's defi- "[e]very employer shall pay to each of his employees . . . our task, therefore, is to determine whether the flsa 2890 cumbie v. woody woo, inc. argued and submitted "free and clear" regulation hinges on "whether or not the tips the actual tips received. therefore, if the cash wage plus tips wages below the statutory minimum. we reject cumbie and decline to read the third sentence in such a way as to render the minimum wage plus all of her tips. woo argues that cum- who take a "tip credit" toward their minimum-wage obliga- richard j. (rex) burch, bruckner burch pllc, houston, 2892 cumbie v. woody woo, inc. toward its minimum-wage obligation. prohibit the pooling of tips among employees who pocket, which is financially equivalent to confiscating cum- 1977) ("[i]f the employer does not follow the command of the [such] an arrangement is made . . . , in the absence of statu- their interpretation is also inconsistent with the regulation itself, employee's tips (also known as a "tip credit"). the second included employees who are not "customarily and regularly plaintiff-appellant, under the flsa, and woo was therefore required to pay her owns her tips depends on whether there existed an agreement the policy preferences" of cumbie and amici. barnhart v. sig- *the honorable charles r. wolle, senior united states district judge 29 u.s.c. � 203(m); see also platek v. duquesne club, 961 f. supp. 835, woo's tip-pooling arrangement. the question presented is one gon, filed a brief on behalf of the oregon restaurant associa- tools for the job, where such purchase "cuts into the minimum 7 defendants-appellees. not resort to legislative history to cloud a statutory text that is clear." ratz- tips received by such employee which 03 (6th cir. 1998). amicus curiae in support of the appellant. with her on the to kitchen staff (e.g., dishwashers and cooks), who are not williams v. jacksonville terminal co., 315 u.s. 386, 397 of a statute." united states v. menasche, 348 u.s. 528, 538- must be allowed to retain all of her tips--except in the case tion of the flsa, 29 u.s.c. � 206." section 206 provides that [8] recognizing that section 203(m) is of no assistance to sentence clarifies that the difference may not be greater than [6] if congress wanted to articulate a general principle that fit that this "de facto" tip credit allows woo to bypass section tables. iv llp, las vegas, nevada. october 6, 2009--portland, oregon