Alaska Employment Law

A restaurant paid  its servers above-minimum wage rates.  The restaurant pooled all tips received by the servers, and then distributed a majority of them to the non-wait staff (e.g., dishwashers and cooks).  The servers alleged that the practice 1) violated the anti-kickback regulation, 29 CFR § 531.35; and 2) violated 29 USC § 203(m) by including employees not “customarily and regularly tipped” as part of the tip-sharing pool. 

A 9th Circuit panel first held that the practice did not constitute a kickback or an improper deduction, because the tips never were the property of the servers; though the default rule is that tips belong to the recipient, that rule may be altered by agreement, as is the case with a tip-sharing arrangement.  The panel next held that § 203(m) kicks in only where the employer pays sub-minimum wage compensation to its servers and uses the tips to make up the difference.  Because this employer paid over-minimum wages, sharing tips with non-recipients didn’t implicate that part of the statute. 

On both issues, the panel rejected the views of the U. S. Department  of Labor, who participated in the appeal as amicus.

Cumbie v. Woody Woo, Inc., ___ F.3d ___ (9th Cir. Feb. 23, 2010)