Wednesday, March 23, 2011

Maryland Federal Court Holds Restaurant Owner Who Also Bartends May Not Share in Employees' Tip Pool

In an issue of first impression, a federal district court in Maryland addressed the issue of whether an “employer” may also be a “tipped employee” and receive a share of the tip pool. The Court held that they may not and also noted that “[e]very court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participation in employee tip pools.” (One of those courts is one in the Seventh Circuit). The court did, however, leave 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 but ultimately held that this case was not one of those possibilities.

So what makes an owner of a restaurant who is performing duties as an employee exempt from the FLSA? The Maryland federal court opined 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 case is Gionfriddo v. Zink, LLC, et al., Case No. Civil Action No.: RDB-09-1733.

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