Waiters and bartenders are among the least compensated people in the nation. Their median hourly wage is $9.61 each hour. Under the Obama Administration’s 2011 regulations, their tips are their property. These regulations prevent an employer from using the tips for any reasons other than as a credit against its usual obligation to pay its employees minimum wage or in order to create a valid tip pool. Valid tip pools are sharing arrangements among employees who customarily get tips, like wait staff, but they don’t include employees who don’t customarily get tips, such as dishwashers or janitors.
Moreover, under section 3(m) of the Fair Labor Standards Act, an employer is permitted to take a tip credit toward its minimum wage obligation for tipped employees that’s equal to the difference between the required cash wage and the federal minimum wage. In certain situations, an employer is able to claim additional overtime tip credit against its overtime duties.
The United States Department of Labor has estimated that around the country, there are about 1.08 million wait staff and 219,000 bartenders who receive tips in 280,000 establishments.
When you leave a tip for a waiter or bartender, you assume that the worker, rather than the restaurant or bar, gets those tips. However, the Trump administration proposed in December that businesses should get to keep total control over the tips earned by their employees. They tried to push the rule through quickly, allowing only 30 days for the public to comment. However, the Department of Labor extended the period for comment. The proposal, if adopted, would be devastating for waiters and bartenders who depend on those tips, and it actually could reduce the quality of service provided to consumers as well.
The purpose of rushing the rule may be to stop the Supreme Court from ruling on a 2011 tipping rule created under the Obama Administration. The restaurant industry has asked the Supreme Court for review of multiple contradictory circuit appeals courts’ rulings.
The seemingly innocuous rationale for the proposal is that this permits restaurants to use tip money toward line cooks and others who are behind the scenes and make less than the tipped workers. Although this sounds like it could improve things for workers, the proposal doesn’t actually require employers to use tip pools this way. In fact, it explicitly allows business owners the discretion to use the money in any way, rather than just to compensate less-compensated workers. In other words, the money could just be taken by the restaurant for the purposes of doing whatever it wants.
Often, restaurants do steal tips and violate the FLSA. The Department of Labor is claiming the proposed rule change could result in reductions in menu prices or improved restaurants. It also suggests that owners will eventually get the tip money to employees because workers will quit if they don’t. However, this is an unsound rationale with no basis in fact. The Trump Administration isn’t providing any incentives to encourage restaurants and other employers to do the right thing with tips and provide their workers with decent living wages. Restaurant workers already work extremely hard for low wages that often necessitate getting a second job. They earn those tips, and often the tips themselves are not significant enough to avoid getting another job to supplement their incomes.
Customers do sometimes factor other aspects of their restaurant experience beyond the direct service into the tip. However, they may not leave tips at all if they realize it may not go to the server. Since some restaurants are already engaged in stealing tips from employees, there is no legitimate basis for officials in the Trump Administration to believe that they would use the tip pool to compensate the workers either in front of or behind the scenes.
It can be important to obtain representation from an experienced employment lawyer when you have a dispute with your employer regarding discrimination or other matters concerning workers’ rights. Contact us at (214) 528-6500 or via our online intake form.
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