New Rule Could Be Costly for Food Service Workers

A new rule by the Trump Administration will give employers the option to share their workers tips or deposit the tips in their own pockets.

In December the U.S. Department of Labor announced a Notice of Proposed Rulemaking regarding tip regulations under the Fair Labor Standards Act. Under the proposed rule, workplaces would have the freedom to allow sharing of tips among more employees.

This rule would rollback regulations that prohibited the distribution of tips. During the Obama Administration, the Department of Labor issued regulations in 2011, reaffirming that “tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA.

The department’s proposal only applies where employers pay the full federal minimum wage of $7.25 and do not take a tip credit and allows sharing tips through a tip pool with employees who do not traditionally receive direct tips.

The proposal is drawing complaints from industry workers.

Logan Young has had multiple jobs in the food industry, and he is one of many workers who are completely against the proposed rule.

Young said in some states tips are all servers get which means servers have to feed families, pay bills, and live off of tips that employers already dip into.

However, the retention of tips in the U.S. Department of Labor Wage and Hour division fact sheet reads that even if a tipped employee receives at least $7.25 per hour in wages directly from the employer, the employee may not be required to turn over his or her tips to the employer.

The FLSA said the requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement. A valid tip pool may not include employees who do not customarily and regularly receive tips such as dishwashers, cooks, chefs, and janitors.

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

Victoria Taylor, whose name has been changed for this story, is a young mother and a server at Louie’s. Taylor said at the end of every night, servers have to report all their tips, so the government can know how much to tax employees from their earnings.

The restaurant can only keep track of credit card tips because they are entered in the computer and have to match the credit card receipt. Yet, the restaurant has no way of knowing if the tips that are made in cash unless the server claims them at the end of the night.

This means there is money employees are earning that no one is aware of, and because of this employees aren’t being taxed for it.

“It’s not that the money doesn’t exist, just that it’s not being taxed. It’s like being paid under the table,” Taylor said.

Taylor believes President Donald Trump is so concerned about fixing the economy he probably thinks if tips were done away with or given to employers then all earnings would be accounted for.

According to the Department of Labor’s Wage and Hour Division, there has been a significant amount of litigation involving the tip pooling and tip retention practices. The proposed rule may result in less litigation. It may allow employers to reduce wage disparities among employees, and also incentivizes all employees to improve customers’ experiences.  

With this new proposal sharing tips among back of the house employees, such as dishwashers, cooks, and chefs, is not the only option employers can make. Employers could share tips between servers, distribute tips among management, keep tips for their businesses, or keep the tips for themselves.

“Splitting tips up even further might be the difference between livable income and poverty,” Young said.


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