On February 5th, the Department of Labor (DOL) has proposed a new amendment stating that restaurant employees such as waiters are required to share tip pools with back-of-the-house workers. According to the Fair Labor Standards Act, this audit would allow line cooks and dishwashers to earn tips that were previously denied to them since they were already being paid the full minimum wage. The department officials withheld an economic analysis of this tip expansion rule from public view when they realized that restaurant workers could lose a significant portion of their paychecks.
This rule would only be enforced on employers who don’t accept tip credits and pay a minimum wage, to begin with. In any case, worker advocacy groups are urging the DOL to abolish this rule change because labor officials did not discuss the potential for wage theft by restaurant owners as they could simply avoid dividing tips among the rest of their workers. The DOL was unable to reach a consensus on the costs and benefits of this amendment. Therefore, a public memo by the assistant inspector, Elliot Lewis, asked for an audit initiation. The audit should clarify why a rule change could violate many state wage laws approved under the Fair Labor Standards Act.
On Monday, 17 state attorneys wrote a letter to Secretary Alexander Acosta in opposition to the proposed rule, claiming it would destroy long-held beliefs about “employee and customer expectations” on tipping in exchange for hospitality services. He argued that employers are responsible for paying higher wages to line cooks and dishwashers instead of subsidizing the earnings of servers so all the workers share gratuities. Thus, the DOL was charged with failing to abide by the Administrative Procedures Act by not informing the public of relevant data regarding tip pooling. Christine Owens, the executive director of National Employment Law Project gave her support to the inspector general for conducting this audit as the integrity of the DOL is being jeopardized by failing to consider the welfare of wage earners. The new rule seems to be sparking debate among advocacy groups who refer to it as a form of legal tip theft. Attorneys insisted that the amendment only affects the distribution of tip pools by workers and not by the employer. It calls into question just how much control over tips employers have.
For instance, in California and New York, local laws state that tips are always the property of employees no matter the circumstance. However, other states must decide if management has permission to share a portion of the gratuities among themselves. The DOL spokesman openly dismissed such an idea as absurd because if it were true, then employees will lose the incentive to provide quality service to their customers. The Trump Administration is now being accused of siding with corporations over workers again, by destroying federal protections for restaurant workers’ meager wages.No doubt, the heart of the issue lies in whether employers have the right to distribute tips when they don’t use tip credit. The potential for tip credit lawsuits and costly litigation are still creating conflicting opinions among attorneys in the labor department to this day.