Dive Brief:

• Tip sharing, a fairly common practice within the hospitality industry, is no longer legal in seven western states, according to media reports
• This week, the 9th Circuit Court of Appeals, in a 2-1 decision, upheld a 2011 U.S. Department of Labor rule that workplace tips are the property of employees who directly receive them from customers.
• The decision means that employers will not longer be allowed to take and share tips given to servers, bartenders, hosts, etc., with "back-of-house" employees (dishwashers, food runners, cooks/chefs). The ruling is aimed mainly at states where workers are paid the minimum wage on top of any tips, according to the LA Times.

Dive Insight:

With its decision, the appeals court refuted district courts in Nevada and Oregon, where the lawsuits were originally filed to overturn the DOL's 2011 rule. According to the labor department's Wage and Hour Division, states directly affected by the ruling include Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington.

Reuel Schiller, a labor law professor at the University of California, Hastings, in San Francisco, told the Associated Press that tips are the property of those who receive them, so employers do not have the right to take tips from one worker and give part of them to another. Rather, the idea is that employers should pay back of house workers higher wages by raising prices, Schiller said.

Barran Liebman, a Portland, Ore., law firm, said in a client alert that employers with tip-pooling agreements should quickly review and revise those agreements to remove employees who are not customarily tipped, and also talk to their employment counsel experts if there is any confusion in the wake of the 9th Circuit Court's decision.