Restaurants throughout the Fifth Circuit, and even beyond, should review the recent decision of Montano v. Montrose Restaurant, which discusses the often tricky and always fact-intensive question of whether a restaurant employee is properly included in a tip pool.
In Montano, the issue presented to the Fifth Circuit was whether a restaurant’s “coffeeman” was properly included in a tip pool with waiters, bartenders and busboys. For restaurant employers, the inquiry is important because the federal Fair Labor Standards Act allows employers to claim a tip credit towards satisfying the minimum wage requirement for any employees in a properly constituted tip pool. However, a tip pool is limited to “employees who customarily and regularly receive tips.” 29 U.S.C. § 203(m). Thus, improperly including even a single employee may invalidate the entire tip pool.
The Montano plaintiff, a waiter, alleged that the restaurant had wrongly included the coffeeman in the tip pool. The parties submitted conflicting evidence regarding the coffeeman’s duties. In general, the evidence showed that he worked behind the scenes making coffee and occasionally would bring bread and food to the dining room. The Fifth Circuit began its analysis by noting that it “is not easy to determine” whether the coffeeman customarily and regularly received tips, stating that his inclusion in the tip pool was insufficient to satisfy the FLSA’s requirement that he “customarily and regularly” received tips. Consequently, the court re-fashioned the question as follows: whether the customer – that is, the person who leaves the tip – would have intended the coffeeman to receive a portion of the tip.
In its analysis, the Fifth Circuit discussed several factors that may be relevant to answering the re-fashioned question, including, but not limited to, whether the employee had “more than a de minimis interaction with the customers who leave the undesignated tips” and whether the employee “is engaging in customer service functions.” (As Judge Dennis noted in his concurring opinion, these are not the only potentially relevant considerations, as the analysis is individualized by the facts at issue including each employee’s particular job duties). The court rejected any attempt to rely on mere job title or “front of house”/”back of house” designation, because “[l]abels are easily molded to fit a party’s goals and cannot be determinative of whether an employee customarily and regularly receives tips.” Moreover, the coffeeman’s job duties changed in June 2011 – raising the possibility that he was properly included in the tip pool for a portion of the relevant time period. In short, the court found that the tip analysis is a “fact-intensive inquiry that requires a case-by-case analysis of the employee’s duties and activities,” and that the district court erred in resolving that conflicting evidence on summary judgment.
If you have any questions regarding tip pool practices or wage and hour compliance in general, please contact the authors of this post or your Proskauer attorney.