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Tip pool ruling cuts restaurant costs

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Articles - January 2011

0111_ATS01A recent ruling by the Ninth Circuit Court of Appeals that allows food service employers in Oregon and Washington to require employees to participate in a “tip pool” is being welcomed by the industry but not some workers.

A Vita Café server sued the Portland restaurant in 2009 in protest of the pool in effect at the time. The ruling will allow restaurants to redistribute some of servers’ tips without violating federal wage and hour law. Oregon Restaurant & Lodging Association spokesman Bill Perry says the ruling gives restaurant owners another way to get around additional costs such as the minimum wage increase effective this month when Oregon’s minimum wage will go up 10 cents to $8.50 an hour. But the server community is worried about the ruling’s implications. “We’re not against tip pooling,” Portland Restaurant Workers Association spokesman Jim Nolan says. “We just think the power to make that decision should be the worker’s, not mandated by the employer.”

Though most servers balk at a system that seems to be a disincentive to provide good service, Perry asserts tip pooling is beneficial to a business as a whole. “Some servers will see themselves as a ‘wage earners’ rather than a ‘commission salesperson,’” he says.“[But] it does give restaurant owners a new management tool.”

With the tip pool, restaurant owners can lower base wages of employees who often are not tipped out, such as cooks, and supplement their wages with tips that are typically distributed to servers. This can help lower prices and keep customers, Perry says.

Randy Capron, maitre d’ of Huber’s, Portland’s oldest restaurant, sees the practice as effectively lowering server pay. “You’re walking away with an 8% not a 20% tip.” Capron says.

The full implications of the ruling for the restaurant and hospitality industry are still unclear. Hospitality law expert Greg Duff recently wrote on his blog: “The short answer is ... that employers in Washington and Oregon may initiate mandatory tip pools under certain circumstances.”

Comments (2)add comment
written by Vettegirl , January 05, 2011 11:40:27 am PST

Min wage in Oregon went up to $8.50 not $8.60 as of Jan 2011
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Minimum wage correction
written by Robin Doussard , January 05, 2011 1:33:18 pm PST

Thanks for the catch, Vettegirl. We will correct.
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