Trump Administration Formally Files Changes to Tip Rules

By Neat Pour Staff |

As expected, the Trump administration is moving to change the rules surrounding tips… and, front of house workers are not going to be happy. On Monday (12.04), the U.S. Department of Labor unveiled a new proposal that will shift ownership of tips to management, allowing them to legally be pooled and redistributed in any means that management sees fit.

The proposed change would remove Obama era mandates that guaranteed a tipped employee full ownership of their gratuities and consequently ban tip pooling. (Yes, unbeknownst to many, tip pooling is illegal—at least, for a few days longer.) A filing from the administration declares,”The Department of Labor (Department) is proposing to rescind portions of its tip regulations issued pursuant to the Fair Labor Standards Act that impose restrictions on employers that pay a direct cash wage of at least the full federal minimum wage and do not seek to use a portion of tips as a credit toward their minimum wage obligations.”

Translated out of legalese, the proposed rule will allow employers to change the way that gratuities are handled. Currently, (according to federal, not state law,) employers must pay tipped employees $2.13 hourly. Any tips collected on top of that are the property of the employee; if tips plus wages equal less than the federal minimum wage of $7.50 hourly, then the employer must make up the difference.

However, if the DOL’s new (de)regulations goes through, employers that pay their employees a base of the federally mandated minimum wage of $7.25 hourly will be able to mandate that all tips are placed into a “pool.” The employer can then redistribute these tips in any way they see fit including cutting non-tipped employees like cooks and dishwashers into the pool.

The pool system is the topic of frequent attack from employe activists. At a core level, many servers and bartenders believe that they should be entitled to any cash they earn and that the decision to tip out co-workers should be their own. Critics also contend that ownership can leverage the pool to pay a portion of back-of-house wages from tips instead of their own pockets. Others point out numerous cases of ownership and management both using shared gratuities as an opportunity to pay themselves, if not outright skim off-the-top.

Powerhouse industry trade group, the National Restaurant Association (often referred to as “the Other NRA.”) has been pushing hard for tip pooling for years, co-financing and co-litigating several lawsuits on the topic along with archconservative think tank, The Cato Institute. In a previous statement, Angelo Amador, Executive Director of the NRA’s Restaurant Law Center said that regulations on tip pooling are “unfairly discriminating against restaurant employees who work in the back-of-the-house.”

On the other side of the aisle, the labor advocacy group,  National Employment Law Project (NELP) condemned the move today. Far from ‘draining the swamp,’ with this proposal, the Trump Administration has put the corporations and the National Restaurant Association front and center in changing the basic legal standards that exist to protect workers and their wages.  Tips belong to workers, period,” said NELP’s Executive Director, Christine Owens. “All this proposal will do is make it harder for tipped workers to get by—yet another example of the Trump Administration’s elevation of corporate interests over those of working people.”

Likewise, the left-leaning Economic Policy Institute (EPI) soundly denounced the administration’s new policy. “Crucially, the rule doesn’t actually require that employers distribute pooled tips to workers,” wrote EPI’s Heidi Shierholz. “Under the administration’s proposed rule, as long as the tipped workers earn minimum wage, the employer can legally pocket those tips.”

Tuesday (12.05) will begin a 30 day public comment period on the rule. However, this is largely considered a formality especially given that the Department stopped enforcing the tip pooling ban this past July.

Although still commonly practiced in the industry, tip-pooling has been illegal since 2011. That is when the Obama administration pushed through a series of pivotal amendments to the Fair Labor Standards Act. At the core, the changes established that employees, not the company, owned their own tips. Consequently, pooling tips was no longer kosher (even if base pay exceeded the $7.25minimum wage) as employees owned their own tips.

However, changing federal regulations is not easy in these times and the new rules were met with a slew of legal challenges. In February 2016, the Ninth Circuit Court of Appeals upheld the law (Oregon Restaurant and Lodging, et al v. Thomas Perez, et al,) but in a different challenge, the Tenth Circuit Court of Appeals ruled against it in June 2017. The conflicting decisions logically seemed to be en route to the SCOTUS for a final decision to resolve the conflict. However, DOL’s newest moves may render that issue moot… until the opposition files a new set of lawsuits.

Photo Courtesy Cory Doctorow, CC2.0

Read Next