March 30, 2008

Tip Pooling in California

Summary of podcast:

Chou v. Starbucks Corporation.

The employees who prepare and serve the coffee are referred to as baristas. Customers would leave tips to these employees, but the company would then take these tips and give a portion of them to the managers. This let them pay the managers less money as they were receiving additional compensation in the form of tips. Practice was illegal and Starbucks must pay approximately $100 million.

California Labor Code Section 351 states:
No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.

Essentially, the law is fairly simple. The tips are never the employer's property. They are simply money that is given directly from a customer to the person who provided them service. The employer has no right to this money.

Complicated when "manager" also provides services. Strict rule is to ensure fairness. Includes anyone who can hire, fire, set schedules, discipline, or take other actions for the employer with relation to employees.

Examples of "fair" split:
80% to waiters. 15% to busboys, 5% to bartenders.
Can be forced to split your tips.

Can be split with anyone who provides service to customer, including: waitpersons, buspersons, bartenders, hostesses, wine stewards and "front room" chefs.

Credit card charges are illegal.

Can not be credited toward minimum wage.