Restaurants could soon require waiters, bartenders and delivery drivers to split tips with their co-workers or even managers if a proposed rule from the Department of Labor takes effect.
The rule would apply only to firms that pay tipped employees at least the federal minimum wage of $7.25 an hour and allow compensation sharing through a “tip pool” with workers who usually don’t encounter the extra cash, such as cooks and dishwashers.
“These ‘back of the house’ employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers,” the department said.
Federal law has long banned companies from forcing workers to divide tips with other employees if the tipped workers don't receive base pay of at least the minimum wage. The Obama administration expanded this protection in 2011 to cover all tipped workers — a move that was challenged in federal court.
Restaurant industry groups commended Monday’s step toward scrapping the regulation.
“We applaud the Department of Labor’s review of tip regulations,” said Angelo Amador, executive director of the Restaurant Law Center, in a statement. “We look forward to submitting comments from the restaurant industry on the new rulemaking.”
But the decision triggered a backlash among worker advocates, who argued the Trump administration's move opens the door for companies to absorb their employees’ tips.
Heidi Shierholz, senior economist at the Economic Policy Institute, a left-leaning think tank in Washington, said the rule leaves room for employers to keep the tips for themselves, as long as the tipped employees earn a base minimum wage.
“This would be a big transfer of money from workers to employers,” said Shierholz, who previously worked for Obama’s Labor Department. “The restaurant industry has wanted this forever. They want to be able to capture tips.”
Christine Owens, executive director of the National Employment Law Project, also condemned the effort.
“If companies have trouble retaining non-tipped workers because their pay is so low, the solution is for the companies to raise the wages of those workers,” she said in a statement, “not for the Labor Department to rig the rules so employers can essentially steal earnings from tipped workers to subsidize the businesses’ low-wage model.”
The median hourly wage for restaurant servers is $9.61, according to the latest numbers from the Bureau of Labor Statistics. Dishwashers, meanwhile, typically make $10 an hour — the same as bartenders, the government data shows.
Waiters in upscale restaurants often earn significantly more than behind-the-scenes staffers. The highest-paid can take home about $20 an hour including tips, according to the BLS. But most servers in the United States make less than $20,000 per year.
Paul DeCamp, a Washington lawyer who represents the National Restaurant Association and previously worked for the Bush administration's Labor Department, said pooled tips are actually ways to support more lower-paid workers, who work in the kitchen, for example.
“You see the people in the front of the house making twice what the people in the back of the house are making,” he said. “It’s a real disparity.”
DeCamp dismissed concerns that restaurants would pocket the tips. He said restaurants that abuse pooled tips could face economic consequences, including higher employee turnover and lawsuits.
“If you’ve got restaurants where you’ve got tipped employees, but the restaurants are keeping all the tips, you’re not going to have those tipped employees anymore,” he said.