Both sides in the tipping wars are claiming victory: worker advocates, who see the provision as a bipartisan rebuke to a proposed Labor Department rule last year that could have legalized a practice now considered wage theft under the law, and the National Restaurant Association, which had been pushing to rescind a 2011 regulation that prohibited tip pooling for back-of-the-house employees in all circumstances.
Signed into law Friday by President Trump as part of the $1.3 trillion spending deal, the new provision gives the restaurant association what it says it wanted all along in its ongoing lawsuit against the U.S. Department of Labor: the freedom for employers to establish pools to share server tips with other hourly workers in the restaurant, especially low-paid line cooks and dishwashers. The idea is that the extra cash will help owners retain back-of-the-house employees and balance the income disparities between line cooks and dishwashers (often Latino) and servers and bartenders (frequently white).
The new law specifically prohibits owners, supervisors and managers from taking a cut of the tips.
“We don’t see employers being prohibited from getting tips as a loss,” Angelo I. Amador, executive director of the Restaurant Law Center, said Friday. “We never asked for that, and we never wanted that.”
Back in 2011, the Obama administration had issued a regulation in an attempt to clarify the Fair Labor Standards Act, which prohibited tip sharing between tipped and non-tipped workers (such as cooks and dishwashers) when employers claimed a federal tip credit. But it was essentially silent on whether employers could start such a pool if they didn’t take the credit. A tip credit is the portion of customer tips that employers are allowed to use to cover a worker’s minimum wage.
The 2011 regulation stated that tips are the property of the employee, regardless of whether an employer claims a tip credit. As such, the tips could be shared only with “employees who customarily and regularly receive tips,” a group that would exclude not just cooks and dishwashers but also managers and owners.
The restaurant association argued that Obama’s Labor Department had overreached when it issued the final regulation more than a year after the U.S. Court of Appeals for the 9th Circuit ruled specifically that employers could split server tips with traditionally non-tipped employees if the businesses did not claim a tip credit. Last year, the Trump Labor Department seemed to side with the restaurant association and 9th Circuit’s decision (even though the very same court would later reverse its own decision). The agency proposed a new rule that would allow, in certain cases, tip pooling with back-of-the-house employees to balance out pay inequalities.
Worker advocates and labor lawyers, however, argued that the rule would give owners control of tips, which they could distribute as they see fit.
Molly Elkin, an attorney who represents workers in cases brought under the Fair Labor Standards Act, told The Washington Post in December that it was a fantasy to think that employers would handle the tips equitably. “The proposed rule does nothing more than authorize wage theft on the part of the employer,” noted Elkin, a partner at the Washington law firm Woodley & McGillivary. “The employer can simply pocket the tips, and Trump’s [Labor Department] will not care.”
In recent years, high-profile chefs and restaurateurs have been sued for alleged wage theft, including Mario Batali, Daniel Boulud, Jessica Biel and the owner of the four-star Sushi Nakazawa in New York. What’s more, in an investigation of more than 9,000 full-service restaurants from 2010 to 2012, the Labor Department’s Wage and Hour Division found that nearly 84 percent of the establishments had some type of violation, including tip violations.
The Trump Labor Department’s proposal motivated workers and their advocates to take action across the country. People left more than 218,000 comments on the proposed amendment when it was published in the Federal Register in December; most were against the rule. Workers and activists also protested at Labor Department buildings in 20 cities, according to Restaurant Opportunities Centers United, or ROC United, an advocacy group for restaurant employees. At the Labor Department’s headquarters in Washington, protesters hung a banner on the building that read: “Trump, Don’t Steal Our Tips!”
The new law protects servers’ tips from management and owners, which is what ROC United and other worker advocates had been fighting for. They also support tip sharing with back-of-the-house employees as long as front-of-the-house employees are not subjected to a sub-minimum wage. Currently, 43 states allow tipped workers to be paid less than minimum wage.
“Today represents a historic victory for restaurant workers,” Saru Jayaraman, ROC United’s president, said in a statement on Wednesday. “The National Restaurant Association wanted to steal workers’ tips, but the workers said no — and they won. The fact that hundreds of thousands of workers stood up and said no to employers taking their tips, and that congressional leadership listened and acted, is a testament to the power of workers standing up together.”
Jayaraman added that servers in the seven states where they are paid the full minimum wage before tips (the federal minimum wage is $7.25, but it’s higher in other jurisdictions) make the same or more in tips as those servers in states with a sub-minimum wage. What’s more, there is less sexual harassment for female servers, she says, and there is more harmony between front and back of the houses. She hopes the new law encourages more businesses to pay all employees one wage, which would then allow them, under the new law, to share tips with all hourly workers, whether front or back of the house.
The Restaurant Law Center issued a statement Wednesday on the new provision, generally content with it but bemoaning the high penalties (“not to exceed $1,100”) for each violation of the tipping law.
“As the voice for restaurants in every local community, we want to ensure that servers, bussers, dishwashers, cooks, and others who work as a team to provide great customer service in the industry have access to share in tips left by customers, as this legislation clearly allows. We are also pleased that the illegal 2011 rule enacted by the previous Administration is being eliminated by this legislation, but our concern is the enforcement and penalty language for unintentional violations goes too far,” said Amador.