Ninth Circuit Upholds Employer Tip Pooling Policy in Cumbie v. Woody Woo

On February 23, 2010, the Ninth Circuit issued an opinion interpreting the scope of tip pooling restrictions imposed by 29 U.S.C. § 203(m) in Cumbie v. Woody Woo, 2010 U.S. App. LEXIS 3686 (9th Cir. 2010). The case was brought by a server at an Oregon restaurant who received an hourly wage at a rate exceeding the federal minimum wage, but was required by her employer to contribute her tips to a “tip pool” which were distributed primarily to kitchen staff. Plaintiff filed a FLSA collective action, alleging that the employer’s tip pool policy was “invalid” under 29 U.S.C. § 203(m) because it included employees who were not “customarily and regularly tipped employees.” The Ninth Circuit disagreed.

As reasoned by the Court, plaintiff’s theory of recovery conflicted with the U.S. Supreme Court’s decision in Williams v. Jacksonville Terminal Co., 315 U.S. 386, 397 (1942), which established a presumption that an arrangement to redistribute tips is valid, as well as the plain language of Section 203(m), which precluded the use of a pool including non-customary tipped employees only where the employer claimed a “tip credit” (i.e. a provision of Section 203(m) which enables an employer to pay tipped employees an hourly wage of $2.13 so long as the employer makes up the difference at any time the tip wages are incapable of meeting Federal minimum wage):

Cumbie argues that under section 203(m), an employee must be allowed to retain all of her tips--except in the case of a "valid" tip pool involving only customarily tipped employees--regardless of whether her employer claims a tip credit. Essentially, she argues that section 203(m) has overruled Williams, rendering tip-redistribution agreements presumptively invalid. However, we cannot reconcile this interpretation with the plain text of the third sentence, which imposes conditions on taking a tip credit and does not state freestanding requirements pertaining to all tipped employees. A statute that provides that a person must do X in order to achieve Y does not mandate that a person must do X, period.

If Congress wanted to articulate a general principle that tips are the property of the employee absent a "valid" tip pool, it could have done so without reference to the tip credit. "It is our duty to give effect, if possible, to every clause and word of a statute." United States v. Menasche, 348 U.S. 528, 538-39 (1955) (internal quotation marks omitted). Therefore, we decline to read the third sentence in such a way as to render its reference to the tip credit, as well as its conditional language and structure, superfluous.

Slip Opinion, at 2893-94.

The Court concluded that plaintiff could not state a legally viable claim under Section 203(m), as her employer did not take a tip credit:

Here, there is no question that Woo's tip pool included non-customarily tipped employees, and that Cumbie did not retain all of her tips because of her participation in the pool. Accordingly, Woo was not entitled to take a tip credit, nor did it. See Richard v. Marriott Corp., 549 F.2d 303, 305 (4th Cir. 1977) ("[I]f the employer does not follow the command of the statute, he gets no [tip] credit."). Since Woo did not take a tip credit, we perceive no basis for concluding that Woo's tippooling arrangement violated section 203(m).

Slip Opinion, at 2894.