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Jan Lee headshot

Trump Administration Says Employers Can Decide Who Gets Workers' Tips

By Jan Lee

The Trump administration's latest concept as to how to bolster the economy: Giving businesses the legal right to take away the tips that restaurant servers earn.

It's the age-old bane of restaurant servers: Trying to balance enough income from the tips that they earn and the regulated wage that employers are permitted to offer. And if a "tip credit" rule proposed by the Trump administration goes through, that struggle is going to become all the more difficult.

Many states permit employers to offer restaurant servers less than the state's minimum wage, rationalizing that servers get tips, and that money should account for part of their wages.Others, like California, have laws in place protecting the right of the employee to receive at least the state minimum wage in addition to their tips. That's in part, because the minimum wage rarely is sufficient these days to cover the cost of living.

Mandatory tip pooling: the research

And in states where mandatory tip pooling in a business is considered legal (some states, such as California, have laws that protect the employee's right to keep the tips he or she earned) companies can require servers and other tipped employees to turn over their tips to the boss so they can be "fairly" distributed among all of the workers in the service line (bus boys, cooks, as well as servers) who contributed to making that tip possible.

But according to research conducted by the National Employment Law Project, in employment settings where the boss had the final say over what happens to an employee's tips, it wasn't guaranteed that those service line employees would actually receive the gratuity. More than 10 percent of workers surveyed for the report Broken Laws, Unprotected Workers in 2015 reported that the companies held their tips rather than distributing them among the service line fairly (which was illegal under federal law).

What is more, researchers were able to draw a correlation between workers at risk for other violations (requirement to work overtime without proper compensation, fear for their job if they had an accident on the job, etc) and settings in which workers reported later that their tips had been stolen by the employer.

The findings have, among other things, raised questions about whether allowing employers to have the final say in how gratuities should be put to use, especially when under the proposed rule, there are no legal requirements for the employer to account for distributing pooled tips at all. Despite its well-meaning defense of back-kitchen workers on service lines, the proposed rule seems to miss a key point, which is to legally require employers to redistribute the tips to employees and not to keep them. According to the Economic Policy Institute's math, the proposed rule would allow employers to have access to as much as $5.8 billion in tips. And it is for that reason -- not the concept of pooling gratuities -- that opponents are offhandedly referring to the rule as legalizing "tip stealing."

Potential economic impact for small businesses and communities, too

But the proposal leaves some other huge questions open as well. And these don't just impact employee rights. They have the ability to affect local economies as well.

Many restaurant servers  will confess that earning tips is an incentive to applying for their particular job. In many states, it's disposable income in the pocket and it gives the employee the feeling of more control over their day-to-day finances.

So will skilled workers be as willing to fill hospitality jobs if they can't trust whether they will receive their tips? What's the incentive for a server or bartender to work for, say, a classy, upper-end restaurat if the employer can decide how much gratuity he or she will receive?

A restaurant's reputation is vital to staying in the black. And chronic job vacancies can spell the death to a business' reputation if they affect customer service. Will restaurants really benefit if they are faced with long training hours for inexperienced or new employees because experienced servers feel they have lost their earning potential?

And how does a law that upends the protections for those who are often the lowest paid but most essential to a sustainable tourism industry help bolster today's economy? Will cities and states really benefit from adding more insecurity to the work environment?

The answer to this last question is best found in today's ever-evolving employment laws. Since the 1980s, more and more states have realized that providing access to a living wage is not only good for the employee, it's good for the economy. It creates incentive and it results in more money in the pockets of small business owners in the form of profits.

If anything, the proposed law would create more insecurity and inequity between workers and make it harder to ensure a stable, incentivized and trained workforce.

Still, there are some limitations to the rule under consideration: It does not affect those states that prohibit tip pooling. It would also only affect workers who earn at least the equivalent of the federal minimum wage through tips and wage.

The proposed changes to the Fair Labor Standards Act is up for public comment until February 3. The comment period has been extended from 30 to 60 days due to an unexpected "backlash" against the proposal, which has incited a debate in Washington over just who should have the right to decide who is entitled to a worker's tips.

Flickr images: torbakhopper

Jan Lee headshot

Jan Lee is a former news editor and award-winning editorial writer whose non-fiction and fiction have been published in the U.S., Canada, Mexico, the U.K. and Australia. Her articles and posts can be found on TriplePundit, JustMeans, and her blog, The Multicultural Jew, as well as other publications. She currently splits her residence between the city of Vancouver, British Columbia and the rural farmlands of Idaho.

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