In a surprising decision that may require many restaurants and
other hospitality businesses in the Western U.S. to alter their
labor practices, the 9th Circuit Court of Appeals upheld a 2011
U.S. Department of Labor (USDOL) rule that prohibits
businesses from requiring employees to share their tips even if the
tipped employees are paid minimum wage. The February 23, 2016
decision applies to all businesses operating in the 9th Circuit,
which includes the states of California, Nevada, Washington,
Arizona, Oregon, Idaho, Montana, Hawaii, and Alaska (Oregon
Rest. & Lodging Association v. Perez).
Background Into Tip Credits And Tip-Pooling
Under the federal Fair Labor Standards Act (FLSA), employers are
permitted to utilize a limited amount of employees' tips as a
credit against their minimum wage obligations through a tip credit.
Under current federal law, if an employee earns $5.12 an hour in
tips, it would be permissible for a restaurant to only pay the
employee
