In an important case out of Baltimore, Maryland, the Court found that Jason Zink, the owner of two Baltimore taverns could not share in the tip pool of the bartenders, even though he also worked as a bartender.
In addition to operating and supervising the “Don’t Know Tavern” and the “No Idea Tavern,” Zink worked as a bartender, serving drinks to and conversing with the patrons, at the two establishments. In conjunction with his working as a bartender, Zink received tips from tavern patrons and contributed those tips to a collective “tip pool” that was subsequently divided up among the bartenders according to a formula that takes into account the number of hours worked by each bartender. Zink, in what appeared to be his primary mode of compensation from his tavern businesses, shared in the tip pool with the other bartenders according to the formula.
The bartenders who worked for Zink contended that, although Zink frequently worked alongside the other bartenders and contributed to the collective tip pool, he was prohibited form retaining any of those tips as a result of his status as the owner of the Taverns. Essentially, the other bartenders argued that because Zink is the owner of the Taverns, he is precluded from receiving tips from the tip pool while simultaneously taking a “tip credit” under the Fair Labor Standards Act (“FLSA”) and the Maryland Wage Payment and Collection Law.
In his Memorandum Opinion, United States District Court Judge Richard D. Bennett pointed out that Zink is unquestionably an “employer” under the FLSA. Judge Bennett found that there was no need to evaluate the extent of Zink’s bartending activities because it would be “anathema to the purpose behind the FLSA to simultaneously allow him to take tips from a collective tip pool that was set up to allow him to pay his employees at a rate substantially below the minimum wage.” As the sole owner of the Taverns, Zink was essentially the sole beneficiary of the “tip credit” provision of the FLSA. As such, he was prohibited from participating in the tip pool at the Taverns. According to Judge Bennett, “a contrary finding, allowing an owner to participate in a tip pool, would broaden the FLSA’s tip credit provisions to a point where they would become meaningless.”