New rule would allow restaurants to control tips earned by their workers

New proposed regulation from the Department of Labor would mandate that tips earned by some food industry employees be allowed to be distributed to co-workers as well. The new rule would have wide ramifications for restaurants, where much of the staff get by on tips.

The government is framing the regulation as a much-needed move to restore wage equity among workers. Most proposed regulations eventually become final.

“Under the proposed rule, workplaces would have the freedom to allow sharing of tips among more employees,” the Labor Department said in a news release Monday. “The proposal would help decrease wage disparities between tipped and non-tipped workers – an option that is currently restricted by a rule promulgated in 2011 that has been challenged in a number of courts.”

New Labor rule would let employers keep workers’ tips

While waiters and waitresses overwhelmingly are the ones who receive money from appreciative customers, the government points out that there are other behind-the-scenes employees at eateries – cooks, dish washers, etc., who don’t get to benefit from the generosity of people who enjoyed their dining experiences.

“These ‘back of the house’ employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers,” the Labor Department said.

Critics have come forward to condemn the measure, calling the new regulation a step backward for labor law.

Christine Owens, executive director of the National Employment Law Project, said in a statement: “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, 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.”

David Weil, who ran the Department of Labor’s wage-and-hour division under President Obama, said on social media that the new policy was  a”shameful” move. “As the person who ran the agency that enforces tipped wages I know wage theft is rampant.”

Heidi Shierholz, senior economist at the Economic Policy Institute, said on the think tank’s blog that that it was “unusual” that the government didn’t even share any projections from tip-pooling among employees. “Recent research suggests that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year, and workers in restaurants and bars are much more likely to suffer minimum wage violations than workers in other industries. With that much illegal wage theft currently taking place, it seems obvious that when employers can legally pocket the tips earned by their employees, many will do so.”

The National Restaurant Association (NRA), which has sued the federal government in recent years to rescind the Obama Administration’s policy on tip-pooling, applauded the new rules.  The NRA’s case may still reach the Supreme Court, which has yet to decide to take the case. The Labor and Justice departments have until February to file a reply, according to the Bloomberg.

The government said the new policy applies only to establishments that pay their tipped workers at least the federal minimum wage of $7.25 an hour. The new regulation is a rollback of a labor law that was strengthened under the previous presidential administration, which ruled that tipped workers cannot be forced to share their tips.

Statistics from the Department of Labor show that the average salary of a waiter or waitress was $24,410 in 2016.

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