Under a new rule proposed by the Department of Labor, restaurants can take servers’ tips and “pool” them in order to disperse some to dishwashers, bussers, etc: but it doesn’t actually require them to do so, and, instead, allows employers to pocket some or all of the wait-staff’s tips.
A 2009 UCLA study of restaurants in LA, New York and Chicago found that about 12% of restauranteurs or supervisors already steal servers’ tips, and though this is illegal, servers find it hard to assert their legal rights. With that level of theft when the practice is illegal, it’s easy to imagine that there would be a lot more tip-theft once this practice was legalized.
In the UK, this was the norm for many years. Bills would have a 12.5% “optional service charge” added to them that patrons generally assumed went to their server (and maybe the house staff); but instead, employers would use this to pay the server’s wages. If the server was earning (say) £7/hour, the first £7 they earned in tips would go to their salary, and then anything over and above went to the server, often minus a heft “service charge” levied by their employers.
We estimate that under this rule, employers would pocket $5.8 billion in tips earned by tipped workers each year. This is 16.1 percent of the estimated $36.4 billion in tips earned by tipped workers annually. A detailed methodology describing how we arrived at that estimate is provided as an appendix, including a discussion of the uncertainty around the estimate. We believe employers will pocket between $523 million and $13.2 billion in workers’ tips annually, with $5.8 billion being our best estimate.DOL acknowledges that employers could legally pocket tips under their proposed rule, which rescinds portions of its long-standing tip regulations, including current restrictions4 on employers keeping tips. DOL states, “The proposed rule rescinds those portions of the 2011 regulations that restrict employer use of customer tips when the employer pays at least the full Federal minimum wage.”5 It is thus deeply unusual that DOL did not provide a quantitative estimate of the amount of tips that will be transferred from workers to employers under the proposed rule, given that they are required to do so by law.
Employers would pocket $5.8 billion of workers’ tips under Trump administration’s proposed ‘tip stealing’ rule [Heidi Shierholz, David Cooper, Julia Wolfe, and Ben Zipperer/Economic Policy Institute]
(Image: Steve Lyon, CC-BY-SA)
(via Naked Capitalism)