Misty Cumbie worked as a waitress at the Vita Café in Portland, Oregon. The café was owned and operated by Woody Woo, Inc. Woody Woo paid its servers an hourly wage that was higher than the state's minimum wage, but the servers were required to contribute their tips to a "tip pool." Approximately one-third of the tip-pool funds went to the servers, and the rest was distributed to kitchen staff members, who otherwise rarely received tips for their services. Did this tip-pooling arrangement violate the minimum wage provisions of the Fair Labor Standards Act? Explain.

Yes, the one-third of the tip-pool funds' rule that went to the servers couldn't have fulfilled the equal to the difference between the required cash wage and the federal minimum wage.

Explanation:

"The CAA prohibits employers from keeping employees' tips. During the development of those provisions, the Department provided technical assistance to Members of Congress. DOL's proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks.

The proposed rule would not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees. An employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (currently $2.13 per hour) and the federal minimum wage. Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees."

Reference: U. S. Department of Labor. "Notice of Proposed Rulemaking (NPRM) : Tip Regulations under the Fair Labor Standards Act (FLSA)." Tip Credit NPRM - Wage and Hour Division (WHD) - U. S. Department of Labor, 2019