I love Europe. What isn’t there to love? It’s an entire continent brimming with culture and teeming in sights; an area extremely rich in history, food and wine.1 Where joie de vivre isn’t relegated to the status of an iPhone application, to be used only during periods of boredom.2
And then there are, of course, the little things: Ease of public transit, a lack of materialistic excess and, generally, no tipping. That’s right—no tipping. When you go to a restaurant, a hotel, or any other service-oriented establishment, you don’t tip. Indeed, in much of Europe, tipping is a faux pas—a cause for serious affront and the recipient of the intended generosity/unintended snub will certainly recognize you for the uncouth American you undoubtedly are.3
Don’t get me wrong4—I’m not looking to give up my citizenship or surrender my passport.5 This blood runs red, white and blue. But it’s simply not un-American to appreciate the finer things about others—including a tip-free society. Imagine a place where you can look at a menu and actually know what the meal will cost you without having to pull out a spreadsheet (or open up another iPhone application). Even better, your bill doesn’t ever contain a “suggestion” in the form of a precalculated 18 or 20 percent tip identified at the bottom of the bill. (I don’t know what offends me more—the fact that a restaurant presumes the service was good enough to merit such a tip, or that the restaurant presumes its patrons are too stupid to calculate simple percentages.)6
But I digress.7 Because what’s more amazing is that the concept of “tipping”—in its purest form—is a merit-based concept. An individual worker who busts his hump gets a bit extra for the excellent service. But in America, tipping has gone away from a form of merit compensation to a form of economic socialism such that tips are expected, regardless of the manner of service. It’s so expected in certain industries (like restaurants), that minimum wages are lower for those industries because of the anticipation of tips—regardless of performance.
To make matters even worse (from a Marxist perspective), is the concept of tip pooling (the actual subject matter of this column). Under such an arrangement, employees share tips with one another—such that the rude server who dumped your glass of wine all over your lap is going to get a share of tips despite his own poor performance. Said another way, the good servers will support the bad servers by giving up a share of the tips they earned—truly a microcosm of the welfare state.
That being said, tip pooling arrangements are particularly common. But, as you can imagine, they’ve generated quite a bit of litigation by upset employees. As a result, over the past few months, California appellate courts have clarified for employers the ways in which a valid tip pooling arrangement can work.
The rules are as follows:
1. Tip pooling arrangements can be legal.
2. No employer (or “agent”—meaning, in short, manager or supervisor) may receive any portion of a tip left for another employee. This does not prohibit the manager or supervisor from receiving a tip left for them. Nor does it prohibit a supervisor from participating in a tip pooling arrangement to the extent that the supervisor provides service to the patrons leaving the tip.
3. Before you think of including supervisors and managers in any tip pooling arrangement, seek counsel. Starbucks initially lost $86 million trying to do this. While the judgment was ultimately reversed, it’s because it had very crafty (or lucky) lawyers put its tip pooling arrangement together.
4. Aside from supervisors/managers, only certain employees can partake in a tip pooling arrangement. Those are the employees who provided the services to the patrons leaving the tip.
5. It used to be believed that tip pooling could only include those who provided “direct” service to the patron (in a restaurant, for example, the servers and bussers). Recently, however, the courts have indicated that employees who “indirectly” provide such service can also partake in the tip pooling arrangement (such as bartenders and, maybe, even cooks). This could lead to a more expansive group of employees that you can incentivize by including in the tip pooling process.
So, while I longingly await my next opportunity to travel to Europe, I leave you with this tip: If you’re going to use a tip-pooling program, make sure you understand the nuances of these rules so you don’t unwittingly end up owing employees for taking away their tips. Trust me—they’re expecting them.
1 All right, almost an entire continent. Certain locations certainly lack in some of these areas (like the British and their food). But you get the point.
2 Again, maybe not the British. But you wouldn’t be so happy either if you were stuck on an overpopulated island with weather that makes Seattle look like a tropical paradise.
3 As if the Birkenstocks with dark socks and shorts weren’t a dead giveaway.
4 Something that seems to happen all too regularly in this column.
5 I’d hate to lose all those really cool customs stamps I’ve collected over the years.
6 Which, according to various alleged “educational” websites, should be taught in grades 3, 4 or 5. Which means that only Chuck-E-Cheese and any place with “bounce houses” should be allowed to assume the patrons can’t do the math themselves.
7 Because I can, it’s my column.
