Addressing an issue of first impression in the Fourth Circuit, a Maryland federal court has held that the owner of a restaurant/tavern—who is also a bartender at his establishment—may not lawfully participate in his employee bartenders’ tip pool under the Fair Labor Standards Act, 29 U.S.C. §§  201 et seq. (FLSA). In Gionfriddo v. Zink, LLC, et al., the court was asked to decide whether an “employer” may also be a “tipped employee” and receive a share of the tip pool. Other bartender employees challenged the employer's acts and the court agreed with the employees, noting that “[e]very court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participation in employee tip pools.” The court left open the “theoretical” possibility that, in some close circumstances, an individual can be an “employer” under the FLSA and at the same time share in a tip pool. This case, however, was not one of those close circumstances.

While the general rule is that employees must be paid minimum wage, i.e., $7.25 per hour under the FLSA, an exception exists for “tipped employees.” Tipped employees are those who are “engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips.” 29 U.S.C. § 203(t). Under these circumstances, an employer satisfies the FLSA requirement if it pays tipped employees at least $2.13 per hour, and that wage, combined with tips, equals or exceeds $7.25 per hour. 29 U.S.C. § 203(m). In this case, the parties agreed that bartending is a tipped occupation.

The defendant owner argued that the language, context, and legislative history of the FLSA compels a conclusion that an owner can be both an employer and employee for purposes of the tip pool provision. The court disagreed, stating that “it would be an anathema to the purpose behind the FLSA to simultaneously allow [an owner] to take tips from a collective tip pool that was set up to allow him to pay his employees at a rate substantially below the minimum wage” and that a contrary finding “would broaden the FLSA’s tip credit provisions to a point where they would become meaningless.”

The court also held that the defendant owner violated the Maryland Wage and Hour Law (MWHL), the state equivalent of the FLSA, by improperly participating in the tip pool. However, the court ruled that the bartender employees who sued were not entitled to recover overtime wages under the MWHL because the law specifically exempts restaurants from its overtime provision. MD. CODE ANN. LAB. & EMPL. § 3-415.

This entry was written by Steven E. Kaplan.

Photo credit: chestnutphoto