Changes to Tip Pooling Rule Could Cost Workers Billions
Critics of President Trump have long maintained that his administration’s goal is to undo most of the legislative progress made during President Obama’s eight years in office. From rolling back environmental protections to attempting to dismantle the Affordable Care Act, the evidence supporting this claim is abundant. But the latest attempt to undo President Obama’s legacy could cost service industry workers billions, as the administration looks to take money directly from their pockets by eliminating an Obama-era regulation on tip pooling.
In 2011, the Obama administration created a rule that prohibited the practice of tip pooling. Rather than forcing tipped minimum wage workers (who are typically paid less than standard minimum wage workers) to share their tips with other staff members like cooks and dishwashers. The rule formalized a practice that had long been the norm for restaurants and other establishments: tips are the sole property of the workers who earn them.
This could soon be a fond memory for service industry workers, as Trump’s Department of Labor (DoL) has been floating the idea of giving employers unprecedented control over their employee’s tips.
The changes to the Fair Labor Standards Act (FLSA) would allow employers to pool the tips of workers who earn over the full minimum wage of $7.25 an hour. In states like Arizona and Nevada, which require employers to pay the full minimum wage to all tipped workers, the change would immediately affect workers’ take home pay.
Even employees who are paid the minimum wage for tipped workers ($2.13 an hour) could see a major decline in their take home pay, as employers would be able to pool any tips they earn above the $7.25 minimum wage. For employees who depend on their tips to supplement their income, this could be disastrous.
The argument can be made that back-of-house employees deserve a cut of a server’s tips. Their work ultimately contributes to a customer’s dining experience, and can positively or negatively impact the amount of gratuity given to a server. However, the proposal put forth by the DoL does nothing to ensure that workers will receive the money at all. In fact, the proposal includes examples of ways employers could use the pooled tips to make “capital improvements to their establishments,” including making renovations, lowering prices, or hiring additional labor.
If the new rule is adopted, employers would be able to effectively pocket the tips earned by their staff, transferring an estimated $5.8 billion from workers to employers. And yet, people still insist Trump is living up to his promises as a Populist who works for the average American.
Wexler Wallace has successfully litigated cases on behalf of employees who have been harmed by illegal and unjust workplace practices. To learn more, please visit our Employment Litigation page.