In Montano v. Montrose Restaurant Associates., Inc., 800 F.3d 186 (5th Cir. Aug. 28, 2015), the Fifth Circuit Court of Appeals reversed and remanded a decision of the Southern District of Texas in which the trial court had granted summary judgment in favor of a restaurant. The issue was whether it was permissible under the Fair Labor Standards Act (FLSA) for the restaurant to include a “coffeeman” (also known as a “barista”) in a mandatory tip pooling arrangement with lead waiters, front waiters, back waiters, busboys, and bartenders.

Tony’s, a fine dining restaurant in Houston, divided its dining room into various “stations” that consisted of several tables. Each station’s tables were served by a lead waiter, front and back waiters, busboys, and other service personnel. According to restaurant policy, at the end of each shift, any tips left on a station’s tables were divided among the lead waiter, front waiter, back waiter, busboy, bartender, and a barista who prepared coffee, tea, and water in the kitchen area.  Each participant in the tip pool received a percentage of each station’s tips except for the barista, who received a fixed amount of $10 per station for each shift. In addition to tips, the participants were also paid $2.13 per hour.

A group of waiters brought suit alleging that by requiring them to share tips with the barista, who they claimed worked exclusively in the kitchen and did not serve customers, Tony’s violated the FLSA. In granting summary judgment for Tony’s, the district court reasoned that

For a worker to be eligible for tip sharing, his work must be important for direct diner service. . . . The barista directly supports the waiters [by making coffee and related concoctions]. . . . Prompt, skillful preparation of these drinks produces diner satisfaction.

On appeal, the Fifth Circuit reversed and remanded the district court’s decision. The court first cited the general rule under the FLSA that an employer may not claim a tip credit and pay less than the hourly minimum wage to a tipped employee unless he or she is permitted to retain all of his or her tips, subject to the limited exception that pooling or sharing of tips among employees is permitted only if those employees customarily and regularly receive at least $30 per month in tips.

The court next reviewed the U.S. Department of Labor’s rules and guidance as well as appellate opinions from other federal circuit courts on the issue of what types of employees can be included in a tip pool under the FLSA. The court found that the common thread in the cases and the DOL rules and opinion letters required a tipped employee to have more than a de minimus interaction with customers who leave undesignated tips. 

Adopting this standard, the court found a genuine issue of material fact as to whether Tony’s baristas were eligible to participate in the mandatory tip pool. Although baristas wore uniforms and carried large trays of drinks to the dining room once per week, they spent most of their time in the kitchen and did not take customer orders, pour water, arrange water glasses, or help to prepare the bread brought to diners’ tables. “From this evidence,” the court held, “a factfinder could find that the coffeeman did not customarily and regularly receive tips” as the term is defined under the FLSA. 

Thus, following the Montrose decision, it will be increasingly important for employers in the Fifth Circuit—particularly those employers in the restaurant and hotel industry—to identify any employees who do not engage in more than a de minimus interaction with those customers who leave undesignated tips and make sure such employees are excluded from a tip pool arrangement. In addition to employees who are normally excluded from tip pools—such as dishwashers, cooks, chefs, food preparers, janitors, and laundry room attendants—this decision mandates that baristas and even bartenders and barbacks, who do not at least occasionally interact with customers, should also be excluded from tip-pooling arrangements.