Wynn’s win for restaurateurs

By Liz Benston

Published Tuesday, July 27, 2010 | 2:01 a.m.

Updated Tuesday, July 27, 2010 | 7:32 a.m.

When the Nevada Labor Commissioner ruled this month that Steve Wynn’s policy of distributing casino dealer tips to supervisors was legal, restaurants across Nevada breathed a sigh of relief.

The ruling doesn’t apply to restaurants, let alone any workplace outside of the one involving dealers working at the Wynn Las Vegas and Encore casinos. Still, restaurant owners were concerned that a decision in favor of dealers would have disrupted long-standing tip-pooling policies among their ranks.

The ruling, they say, could have established a negative precedent for who can and cannot receive a share of tips customers leave on the table — whether that be a blackjack table or one covered with linen and silverware.

Wynn attempted to bolster his case before the labor commissioner by seeking testimony from the Nevada Restaurant Association on the subject of tip-pooling. Though casino pits and restaurants have vastly different cultures, they share an interest in protecting tip-pooling practices. Commissioner Michael Tanchek forbade such testimony, however, saying it was irrelevant to the subject at hand.

At issue in the Wynn dispute was whether the casino could force dealers to share tips with their immediate supervisors — a group that doesn’t customarily receive tips.

Restaurants have long required food servers to split tips with other restaurant workers after servers pocket the money left by diners. Many agreements are voluntary, however, among front-of-house employees such as servers, bussers and bartenders. Few servers would argue with the need to tip out bussers who clean plates off tables for customers or those who mix drinks for them at the nearby bar. Some restaurants have formalized long-accepted tip arrangements by imposing standards on who should receive a share of tips and how much. Workers are typically informed of such tip policies before they begin employment.

Things get sticky when employers, like Wynn, start expanding the tip pool beyond historically accepted borders.

Courts have found that employers have the right to mandate that workers pool tips and redistribute them. In Nevada, several cases have authorized casinos to force tip-pooling among dealers so that dealers working different shifts get an equal share of the bounty. While some dealers initially resisted the move, the policy is widely accepted today. The question that dogs courts and labor law administrators everywhere is just how wide-ranging these tip pools can be.

In the Wynn case, the labor commissioner reasoned that the dealers’ supervisors — who were also underlings in the sense that they did not have the power to hire and fire dealers — had enough involvement with customers to receive a share of tips.

Restaurants have tinkered with tip pools for years. Some eateries include back-of-house employees, such as cooks and dishwashers, in the tip pool. Others include a wide array of front-of-house workers such as hostesses.

Tip-pooling remains a murky subject because few workers challenge such policies, which are governed by a patchwork of state laws and an often-disputed federal statute.

A recent case in Oregon, however, has shed some light on the subject.

Waitress Misty Cumbie filed a federal lawsuit against her employer in 2008 for forcing servers to share most of their tips with kitchen staff, including cooks. In February, a three-judge panel of the Ninth Circuit Court of Appeals said the restaurant’s policy did not violate federal law, which states that employers may not force workers to pool tips with those who do not “customarily and regularly” receive them.

That section of law only applies to employers that use “tip credits” and doesn’t address the general issue of to whom tips belong in general, the appeals court said.

So-called tip credits, common in the restaurant industry, allow employers to pay workers as little as $2.13 per hour, making up the difference required under the federal minimum wage with tips. Tip credits are illegal in Nevada, however — one of only seven states, including Oregon, that prohibit them.

So long as employers pay workers minimum wage and do not use tips to supplement those wages, they are within their rights to have workers pool tips among different groups of employees, the court said.

The Labor Department disagreed, asserting in an amicus brief in Cumbie’s favor that the restaurant’s policy violated the law and “will almost assuredly result in the tipped employees receiving less than they are entitled under the (Federal Labor Standards) Act — the minimum wage free and clear plus all of their tips.”

Cumbie argued that her employer unfairly benefited from this tip scheme by using server tips to supplement the salaries of kitchen workers — who don’t customarily receive tips.

Wynn dealers made a similar argument in their case, claiming Wynn’s company financially benefited by using dealer tips to bolster the salaries of supervisors who, by contrast, should not be tipped.

It’s no surprise that Nevada restaurants — now subject to an $8.25 minimum wage if no health insurance is offered — want flexibility to supplement employee wages in lean times. The Nevada Restaurant Association, keen on a beneficial outcome in the Oregon case, filed an amicus brief in support of the Oregon restaurant stating that federal law doesn’t dictate who should or should not receive tips.

To close this gap, states such as California have enacted carefully worded laws making tips the sole property of the individual the money was left with, the group said.

“In short, if the Department of Labor does not like its regulations, it should amend them ...” the brief reads.

(Nevada business interests including Wynn helped sabotage efforts by casino dealers to clarify the state’s much-disputed tip law.)

The real-life application of tip pools, at least at one Las Vegas restaurant, is less sinister than it may sound.

The tipping scheme at Ricardo’s is typical save for one aspect. Besides sharing their tips with bussers and bartenders, servers must share a fraction of their tips — $2 per server per shift — with kitchen staff involved in the cooking and preparation of food.

The decision, which is binding in Nevada, received a passing reference in the labor commissioner’s decision in favor of Wynn. Yet the labor commissioner, who has the first word on tips in this state, does not establish legal precedents and instead decides matters on a case-by-case basis.

With or without a lawyer’s blessing, Ricardo’s owner Bob Ansara is comfortable with his 31-year-old tip-sharing policy because his employees favor the plan, which is outlined for workers when they are hired.

The nominal amount cooks receive is more than fair considering their vital contribution to the customer’s restaurant experience, said Ansara, director emeritus of the Nevada Restaurant Association.

Though kitchen workers don’t interact with customers, the way food is prepared can determine the size of the server’s tip — or the existence of one, he said.

Ansara said his restaurant also has formalized how much front-of-house workers should receive from the tip pool to ensure that deserving workers get a fair share.

Not that Ansara lacks sympathy for the Wynn dealers who lost their case before the labor commissioner.

What’s legal may have little relation to what’s fair — depending on where you sit, he said.

“If I were a dealer and my tips were used to compensate managers, I would be upset.”

CORRECTION: This story has been corrected. The Ninth Circuit includes Nevada and, therefore, its rulings are binding on the courts here. | (October 31, 2018)