Employers cannot prevent Customers from tipping their Employees

Yesterday, I ordered some fast food at a local Panda Express drive-thru window.  The server was uncommonly friendly and courteous in genuine manner.  She deserved a tip.  Customers typically don’t tip fast food workers, but after this experience I’m going to start doing it regularly.

During payment, I told the server the extra amount was a gratuity.  The server replied that she wasn’t allowed to accept tips.  I was flabbergasted!  A good chunk of my career has been in customer service, and never have I been told by an employer that I couldn’t accept tips.  I asked to speak with her supervisor.  The young gentleman came over to the window and explained that the no-tip rule was “company policy.”  Undeterred, I firmly asserted that policy to be “wrong.”  The supervisor seemed chagrined to find himself in such a dilemma.  He abruptly relented and allowed the server to accept the gratuity.

On this day when fast food workers are striking across the nation for livable wages, this incident compelled me to do some research on corporate no-tip policies.  What I discovered was rather astonishing, and it convinced me that employers cannot prevent customers from tipping their employees.

From the Department of Labor – Fair Labor Standards Act:

Tipped employees are those who customarily and regularly receive more than $30 per month in tips.  Tips are the property of the employee. [emphasis added]  The employer is prohibited from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool.  Only tips actually received by the employee may be counted in determining whether the employee is a tipped employee and in applying the tip credit.  [Note:  some states do not allow the use of “tip credits” to reduce minimum wage requirements]

Tip Credit:  Section 3(m) of the FLSA permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage.  Thus, the maximum tip credit that an employer can currently claim under the FLSA is $5.12 per hour (the minimum wage of$7.25 minus the minimum required cash wage of $2.13).

Tip Pool:  The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers, and service bartenders.  A valid tip pool may not include employees who do not customarily and regularly received tips, such as dishwashers, cooks, chefs, and janitors.

* * * * *

As noted above, the requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips.  The FLSA does not impose a maximum contribution amount or percentage on valid mandatory tip pools.  The employer, however, must notify tipped employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each tipped employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.  [emphasis added]

Nevada, whose economy is primarily composed of customer service oriented industries, has even more stringent laws protecting tipped employees:

NRS 608.160  Taking or making deduction on account of tips or gratuities unlawful; employees may divide tips or gratuities among themselves.

1.  It is unlawful for any person to:

(a) Take all or part of any tips or gratuities bestowed upon the employees of that person.

(b) Apply as a credit toward the payment of the statutory minimum hourly wage established by any law of this State any tips or gratuities bestowed upon the employees of that person.

2.  Nothing contained in this section shall be construed to prevent such employees from entering into an agreement to divide such tips or gratuities among themselves.

[1:17:1939; 1931 NCL § 2826] + [2:17:1939; 1931 NCL § 2827]—(NRS A 1967, 623; 1971, 1263; 1973, 644)

In specific regards to no-tip policies, it was surprising to discover how little these have been challenged in court.  Two recent cases stand out.

In Don DiFiore v. American Airlines, Inc., a district court ruled that American Airlines’ imposition of a curbside check-in fee was a violation of Massachusetts state law directed against “service fees” whose payment would reasonably be expected by customers as gratuity for skycap workers.  On appeal, this decision was reversed based on the preemption language “related to a price, route, or service” included in airline deregulatory measures enacted by the U.S. Congress in the 1970’s and 1980’s (see:  The Airline Deregulation Act of 1978).  While the appellate action was a defeat for the skycap workers, it did not directly undermine the basic legal protections for tipped employees.

In Ron Meshna, Christina Muise Liana Ortiz, Ralph Sherrick v. Constantine Scrivanos, a Massachusetts superior court ruled that although Dunkin’ Donuts’ no-tip policy wasn’t itself illegal, any confiscation of tips intended for employees was illegal.  From:  Dunkin’ ‘no-tipping’ policy not illegal

A “no tipping” policy in place at some Massachusetts Dunkin’ Donuts isn’t inherently a Wage Act violation, a Superior Court judge has ruled. But the employees who sued the owner of a number of Dunkin’ franchises can continue their lawsuit, which alleges that tips left for them despite the policy are passed along to management.

According to the suit, franchise owner Constance Scrivanos requires that any tips left on the counter be returned to customers. If the customer is out the door before the money can be given back, the employee must put the money in the cash register, where it is retained by management, the plaintiffs claim.

Judge Judith Fabricant ruled that the Wage Act “does not by its terms bar an employer from adopting and enforcing a no-tipping policy … in the context of a coffee shop such as this defendant’s business, an employer might reasonably seek to avoid the administrative burden of accounting for tips and allocating them among those employees entitled to receive them.”

But Fabricant refused to toss the suit, saying that if the plaintiffs can prove that management keeps tips that customers believe are going to employees, it would constitute a violation of the statutory prohibition against such practices.

“If an employer chooses to prohibit tipping, it must take responsibility for communicating that policy to its customers effectively,” Fabricant said.

Around the world, cultural attitudes towards tipping vary greatly.  In America, it is accepted practice that good customer service should be rewarded by the customer because it isn’t always rewarded by the employer.  In particular, large corporations often have the attitude that training and conditioning (i.e. punishment) can produce uniform customer service quality.  My personal experience as a bartender, food server, and restaurant manager, has convinced me otherwise.  Good customer service is dependent upon personal interaction skills, not a robotic adherence to behavioral guidelines.  While politeness and conflict-resolution can be taught, not everyone is cut out for this type of work.  Those who do it well possess a talent which would be commensurately compensated if the current economic system was truly a free-market.

In my opinion, the no-tip policies of Panda Express and other large chains are motivated by corporate greed and the hostility towards workers inherent in modern global capitalism.  Their official statements to the contrary are designed for self-promotion, not self-admission.  Everyone knows it, but few can publicly speak about it.

As our economy moves inexorably towards more low-wage, low-benefit service jobs, while corporate profits continue their magnificent rise, fast food workers are rapidly becoming the impoverished equivalent of indentured servants.  Give them a break.  Demand that you be able to give them a tip.  Or better yet, demand that these egregious no-tip policies be ended now.

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3 thoughts on “Employers cannot prevent Customers from tipping their Employees

  1. Thank you for posting this! I tried to give the cashier at Panda Express a tip the other day and she asked “What’s this?” I said “It’s a tip for you.” She replied “We can’t take tips.” I told her “Please tell your manager that made me very upset.” She just looked at me like I was a crazy lady. But it really did tick me off. A tip is optional. I never feel obligated to tip, and I certainly don’t feel happy or relieved when a place refuses to accept a tip.

    MOST INTERESTING from your post was the comment that the policy to not accept tips was not illegal but confiscating a tip intended for the recipient was. I recently left a tip in a basket that was clearly set out for tips at a college basketball game. Later (after I spilled my soda and the cashier refilled it for me) I said “Hey, at least I did tip you before.” And pointed out my lone dollar laying in their otherwise empty tip basket.

    She informed me “Oh, we don’t get to have those, the school keeps them.” WTH? I said “Then I’m taking it back!” And she said “You should!”

    • My goodness, that college confiscates its worker’s tips? If any institution should know better, it’s one ostensibly dedicated to higher learning!

      FYI, I haven’t been back to Panda Express since that incident. We consumers need to start effecting social activism through principled discretion in our spending patterns. Spread the word, and thanks for commenting!

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