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Bartenders May Participate in Mandatory Tip Pools Even If They Do Not Provide "Direct Table Service" -- Budrow v. Dave & Busters

California confers a special legal status on employee tips.  Under California Labor Code section 351, tips are not considered part of the wage paid by the employer, but are rather treated as a direct payment from the patron to the employee.  As a result, they are the property of the server from the very beginning and the employer is not permitted to take a "cut."   

Courts have recognized, however, that more than one employee often contributes to the service. And customers presumably expect that their tips will be fairly apportioned among these employees.  Thus, opinions such as the 1990 decision in Leighton v. Old Heidelberg, held that employers may require servers to "split tips" with busboys, hosts, and others.  As that court explained:

[T]he restaurant business has long accommodated this practice which, through custom and usage, has become an industry policy or standard, a ‘house rule and is with nearly all Restaurants,' by which the restaurant employer, as part of the operation of his business and to ensure peace and harmony in employee relations, pools and distributes among those employees, who directly provide table service to a patron, the gratuity left by him, and enforces that policy as a condition of employment.

But Old Heidelberg's reference to employees "who directly provide table service to a patron," created uncertainty as to which employees may qualify.  What about cooks, bartenders and others whose work does not bring them into direct contact with the customer's table?

The Second District Court of Appeal decision in Budrow v. Dave & Busters has seemingly laid this particular issue to rest by declaring that the Labor Code cannot be read as creating a distinction between "direct" and "indirect" table service when it comes to eligibility for tip pooling.  Instead, the court held that the touchstone must be the intent of the customer under the totality of the specific circumstances.

It is in the nature of a tip pool that it is based on the general experience of each particular establishment, that it is only broadly predictive of the reasons for and the patterns of tipping in that particular restaurant and that, in the final analysis, this is the best that anyone can do. It is simply not possible to devise a system that works with mathematical precision and solomonic justice in each one of the millions of transactions that take place every day.

Section 351 provides that the tip must have been "paid, given to, or left for" the employee.  Given that restaurants differ, there must be flexibility in determining the employees that the tip was 'paid, given to or left for.' A statute should be interpreted in a reasonable manner.  Ultimately, the decision about which employees are to participate in the tip pool must be based on a reasonable assessment of the patrons' intentions. It is, in the final analysis, the patron who decides to whom the tip is to be 'paid, given to or left for.'  It is those intentions that must be anticipated in deciding which employees are to participate in the tip pool.

This "customer intent" standard is consistent with the purpose of the statute.  However, it also raises more thorny issues than it answers.  For example, if some customers intend to benefit only the waitress and not the cook, can their tips be thrown into the general pool?  Should surveys or opinion polls be used to determine how customers wish to apportion their tips between different categories of workers?   

Perhaps most importantly, who bears the burden of proving that a restaurant's tip splitting scheme reflects a "reasonable assessment of the patrons' intentions?"  The Budrow Court seems to have implicitly placed the burden on the non-bartender employees because it upheld the grant of summary judgment against them despite the apparent absence of any admissible evidence of customer intent. 

 

 

 

Full post as published by California Labor & Employment Defense Blog on March 03, 2009 (boomark / email).