In a tipout system, what started as one enterprise (a restaurant selling its food & hospitality to its guests), has now spawned two completely new, concurrent businesses: the business of the server selling the perception of extra attention to the guest for tips; and the business of the kitchen workers selling favors to the servers for tipout. These additional, parasitic businesses are not focused on improving the quality of the original enterprise. Instead, these secondary businesses are focused on maximizing income using short term, and proven effective, means. ...
Over the last couple years, another alternative has started to emerge β the lawful tip pool. In this model, the business is permitted by the law of the land to distribute its tips among every member of its team, including kitchen workers. In the Ninth District (the western US), one court decision (Cumbie v. Woody Woo) has paved the way for this, but the US Department of Labor has attempted to nullify that decision by issuing new regulations. Itβs not clear that the Labor department is actually allowed to trump the court, and the matter is not yet clearly resolved.
Back in 2006, however, it was still definitely illegal for a tip pool to include back-of-house workers. The only legal way that tip revenue could be distributed among the whole team was for it to not be tip revenue. Instead, it had to be an amount charged by the business for its service. In other words, a service charge.
