Stealing Tips


December 19, 2017

Advocates for restaurant employees and other tipped workers are speaking out against a proposed rule that would make tips the property of employers, a proposal which opponents fear would lead to significantly less income for workers.
The regulation from the Trump Administration’s Department of Labor, pushed by the National Restaurant Association, would allow for the confiscation of tips as long as the tipped employees are paid full minimum wage.  Backers say restaurant owners should be able to distribute the tips any way they see fit – for example, to “back of the house” staff such as cooks or dishwashers, for capital improvement projects, or even to the pockets of managers and owners.

Rep. Keith Ellison (D-MN) speaks out against a proposal that would allow restaurant owners to confiscate workers’ tips.

But groups bitterly opposed to the regulation are fighting back.  Restaurant Opportunities Centers (ROC) United, the Economic Policy Institute (EPI), the National Employment Law Project (NELP) and recently held a news conference on Capitol Hill to speak out against the proposal, which was only unveiled earlier this month and is on a fast-track toward approval early next year.  Organizers were joined by Sen. Jeff Merkley (D-OR) and Rep. Keith Ellison (D-MN).

The Department of Labor has long interpreted the Fair Labor Standards Act as mandating that tips are the property of workers who receive them, regardless of whether or not the employer pays a sub-minimum wage, or pays a wage of at least the federal or state minimum wage, whichever is applicable.  This long-standing position was finally codified in regulations issued by the Department in 2011.

In 43 states, the minimum hourly wage for tipped workers is well below the full federal minimum wage of $7.25 – meaning restaurant wait staff rely on tips for simple survival.   EPI’s Heidi Shierholz estimates that if the Department of Labor proposal is implemented, employers will pocket $6.1 billion of employees’ tips every year – 17 percent of total tips, which are estimated at $36.4 billion in the nation’s fastest-growing and second-largest industry.  She calls the proposal a “huge transfer of tips from workers to employers.”

Seven states require that restaurant employees be paid at least the prevailing minimum wage – Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.  An eighth state, New York, will soon join the list, and voters in Washington, D.C. will vote on a “One Fair Wage” proposal next year.  The One Fair Wage campaign seeks to ensure that tipped and non-tipped employees are compensated the same in all 50 states plus D.C.

In the seven states, state law severely restricts owners or employers from accessing wait staff’s tips, and that’s how it should be, say Merkley and Ellison, two leaders from states that have a One Fair Wage.

“The restaurant owner can’t reach in and grab those (tips) – but here comes Team Trump,” Merkley says, sharply criticizing the proposal.

“The tip is for the worker,” Ellison explains.  “Who are you giving it to – the owner of the restaurant who probably isn’t there?  Or the person who brought the food to you?”

Ellison compares the unemployment rate and state of the economy of his home state, Minnesota, with that of neighboring Wisconsin.  Minnesota is faring better, he says, in part because it has the One Fair Wage.  He says tipped workers who receive the full minimum wage and tips on top of that are more likely to go out to restaurants themselves – and become tippers.  “One Fair Wage is better for the individual worker and for the whole economy,” he says.

Sara Jayaraman, representing ROC United, notes that 13 million Americans work in the restaurant industry.  Some 70 percent of tipped workers are women, and these employees are particularly vulnerable to sexual harassment.  She says the seven One Fair Wage states have far fewer cases of sexual harassment, and that the problem will grow much worse if the Department of Labor proposal becomes law.  “They actually have higher job growth in the restaurant industry and half the sexual harassment rate,” says Jayaraman, an economics professor who has researched and written extensively about the tipping economy.  “These seven states are shining examples of what we really need.”

Many advocates make the connection between how tipped workers are treated and sexual harassment.  Advocates for tipped workers say the Department of Labor regulation would exacerbate the epidemic of sexual harassment, because economically vulnerable workers would be at greater risk of abuse, and more afraid to report abuse when it occurs.

Judy Conti, representing NELP, notes that restaurant wait staff are not the only ones who would be adversely affected by the proposal.  She says it also would cover many others who rely on tips – delivery people, bellhops, concierges, valets and parking attendants, for example. “If you care about workers…you would implement a regulation that says tips are the property of workers and workers only,” she says.

The National Restaurant Association – which some labor advocates call the “other NRA” – and its members have long wanted control over how, and to whom, tips are distributed, NELP and ROC note in a joint statement.  The statement notes that the proposed regulation “contains no safeguards at all against an employer simply pocketing the tips and using them however it sees fit.”

The statement continues:

“This proposed regulation is bad for the tipped workers who can now have their tips stolen by their employers, and it is bad for consumers who think they are tipping the workers who serve them, but may be unknowingly lining the pockets of businesses at the expense of workers.”

Although proponents of the rule change argue that they can effectively use pool tips to compensate back-of-the-house workers, opponents vociferously disagree.  They note that under the status quo, it is extremely common for dishwashers, bussers, and barbacks to receive pooled tips; indeed, some restaurants mandate this practice.  They argue that the likely outcome of the proposed rule change would not be “tip pooling” but more like “tip stealing.”

Thea Bryan agrees.  Bryan, a single mom, graduate student, and D.C. bartender, says that for the past two weeks, she has failed to make full minimum wage every single day that she has worked.  When business is slow, she says, the owner gets paid, the manager gets paid, but she doesn’t, even though the law requires restaurant owners to get workers up to the minimum wage if tips do not get them there.  “For two weeks now I haven’t been paid minimum wage.  I have been trying to get management to make up the difference, but to no avail….The National Restaurant Association says they know how to distribute tips.  I don’t think this is true.  I think the tips will go into their own pockets.”

Want to speak out against the Department of Labor proposal?  Text TIP to 225568, and you’ll get a message back explaining how you can speak out.

Labor and Employment
minimum wage
tax cut
tax policy
Tipped workers