For budtenders, tips earned in a dispensary can add up to hundreds of dollars per week. However, how that money is pooled and divided is critical for a dispensary operator to understand. Managers and supervisors, be wary.
1. What Is a Tip Pool?
Tip pooling in a dispensary is the practice of taking gratuities received from patrons and customers and pooling either all or part of them to be distributed among employees. It is a routine practice in restaurants and other places where an employee is serving a patron or customer. Because cannabis remains illegal at the federal level, major credit card networks—including Visa, Mastercard, and American Express—do not process transactions for cannabis retailers. As a result, these businesses operate predominantly on a cash basis, which often leads to substantial cash tips for budtenders. Tip pools in a dispensary are generally limited to employees in occupations in which they customarily and regularly receive tips, such as budtenders who provide service directly to a patron or customer and who do not have managerial responsibilities. Failure to carefully implement a legal tip pooling policy can have disastrous results because all of the dispensary’s tipped employees may have a claim if the tip pool is improperly administered.
2. Managers and Supervisors Cannot Take Tips.
The federal Fair Labor Standards Act (“FLSA”), along with analogous state and local laws, strictly prohibits managers and supervisors from participating in tip pools. Under the FLSA, job titles do not control; actual job duties and responsibilities do. If an employee has managerial authority, they should not be taking tips.
Under the FLSA’s “executive” duties test, an employee with managerial authority is an employee who:
- customarily and regularly directs the work of two or more other full-time employees or their equivalent;
- has the authority to hire or fire other employees, and/or their suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight; and
- has a primary duty of managing the enterprise or a customarily recognized department or subdivision of the enterprise.
An employee whose primary duty is managing or supervising may also perform non-management duties, including tip-producing work, and still meet the duties test. For example, a “lead budtender” who performs work like serving customers during the dispensary’s busiest periods would still be exempt from the tip pool if their primary duty is managing or supervising the dispensary—a manager typically directs and supervises other employees’ work while performing this customer service work.
The bottom line is, if the employee directs other employees, influences hiring or firing decisions, or controls schedules, they may legally qualify as a manager or supervisor under federal or state law and should not be taking tips. Moreover, managerial or supervisory employees must be aware that they cannot retaliate against or discipline employees for complaining about the tip pooling policies or practices of a dispensary, even if there is no merit to the complaint. Otherwise, the dispensary may be subject to potential exposure for a retaliation claim, in addition to the original wage and hour / tip pool claim.
3. What Should Dispensaries Do?
Dispensary owners and operators should consider reviewing their tip pooling practices and policies or instituting a written policy if one is not already in place to be sure they are in compliance with federal and state law. An experienced attorney should be consulted before instituting or revising a tip pool policy.
https://www.jdsupra.com/legalnews/tip-pooling-in-cannabis-dispensaries-be-6901039/
