Is Tip Sharing Between Exempt and Non-Exempt Employees Okay?

Q.     My employees at my local burger joint have seen the demonstrations and protests for higher minimum wage, and some of them seem pretty “fried” about their pay.  I simply cannot afford to pay my wait staff more than minimum wage at my restaurant, but I do let them collect tips.  Some of the “crew leaders” who do not work the floor of the restaurant, but supervise all my wait staff, have asked if they, too, can supplement their income with tips.  I was hoping my wait staff employees could just share the tips they make with their crew leaders. Can I “shake” things up and let my supervisory crew leaders partake in tip-sharing? Does it matter whether the crew leaders are exempt or non-exempt employees?

A.     As far as “shaking things up,” likely not.  Labor Code section 351 provides that “[n]o employer or agent shall collect, take, or receive any gratuity or part thereof that is paid, given to, or left for an employee by a patron . . . .” The term “employer” is defined in Industrial Wage Order 5, the wage order that governs the restaurant industry, as “any person … who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.” Accordingly, the DLSE prohibits restaurant owners, managers, or supervisors from participating in any tip-sharing or tip-pooling arrangements. This is true even when an owner, manager, or supervisor is engaged in providing direct service to patrons.   Consequently, if a crew leader serves as a supervisor for the employer, the crew leader should not (in most instances) partake in any tip-pooling arrangement. Some elements that would suggest a crew leader works in a supervisory capacity are: (1) the crew leader is in charge of other employees during his/her shift; (2) the crew leader is the lead employee on duty during his/her shift; (3) the crew leader is responsible for setting work schedules or wages for other employees;  and (4) the crew leader is responsible for conducting any type of employee evaluation. The determination as to whether or not a crew leader is a supervisor cannot strictly be determined by the crew leader’s exempt or non-exempt status.   Unfortunately, this will not make your crew leaders happy.  Maybe provide them this tip, they could soon be replaced with computers.

This Legal Update / Bulletin is for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. The hypothetical question is posed to illustrate a point and does not contemplate all potential legal considerations This update should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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