The proposed changes, first announced in July, roll back the Obama administration’s 2011 regulations that expressly prohibited the distribution of tips to anyone other than the front-of-house staff who earned them. Backers argue it’s a regulation that could go a long way towards erasing income inequality between back and front of the house. Others say it’s a recipe for a host of evils, ranging from tip-pocketing by management to unsustainably high labor costs.
Under the Obama administration’s 2011 regulations, tips are considered the property of the service-facing employee (waiters, bussers, bartenders), and therefore employers cannot require them to share their tips. “The waiter’s position has always been, tips are our property, and under Obama, that was the case,” says Marc Zimmerman, a hospitality labor and employment lawyer for the past 20 years and a partner at Michelman & Robinson.
The result has meant a stark income disparity between waiters and cooks. As restaurateur Danny Meyer argued in his 2010 book Setting the Table, tipped employees are making about 300 percent of what they were 31 years ago. During that same period, everyone in the kitchen — the dishwasher, non-tip-eligible employees — has seen their hourly income go up about 20 percent.
The inequity between front and back of the house has caused some operators, notably Meyer, to abandon tipping altogether. The practice has been the subject of much heated discussion in the industry. Some clever operators are sending cooks out into the dining room to run and serve food so that they can be considered “service-facing” and share in the tip pool. Others suggest the better fix for restaurant workers would be to instead split tips between back of house and front.
A big problem with the new regulations is that employers may now legally pocket tips. Under the traditional paradigm, an employer takes the tip credit, pays all of their “service-facing” employees $2.13 an hour plus tips, and pays cooks and dishwashers $7.25 an hour, no tips (the numbers would be different according to minimum wage laws state to state, but this is the general idea).
But if they decide to follow the DOL’s new rule, and they don’t take the tip credit, and instead pay minimum wage of $7.25 an hour to all their employees, then tips are no longer considered the property of the employee; they become property of the employer. That employer could split those tips between back and front of the house. Then again, the employer could also keep them all.
The National Restaurant Association, which has come out strongly in support of the Trump Administration’s proposed change, acknowledges this loophole, but has not asked the DOL to add a provision that would bar an employer from keeping an employee’s tips.
Indeed, wage theft, which includes suits for failure to pay overtime, improperly counting hours, and misappropriating tips, is a huge issue in the restaurant industry and the subject of many lawsuits. As some immigration advocates note, undocumented and immigrant workers are particularly vulnerable to wage theft, as they might not feel empowered to file complaints against their employers; the issue is rampant enough that one organization has developed an app that helps workers report incidences of theft.
The rationale in favor of Trump’s tip-sharing regulation rests on a big-picture concept of service. “Service comes from the entire restaurant,” says Dan Rafalin, managing partner at Avroko Hospitality Group, which owns and runs restaurants like Saxon and Parole and Genuine Roadside in New York City. “We believe that the cooks are part of the service experience and customer experience. We all come to work and we are in it together.”
For the next 30 days (until January 4, 2018) the DOL will accept public comments on the proposed regulation. “This allows for a virtual town hall open forum, for voices on both sides to argue their case,” explains Zimmerman. “Some proposed regulations get tweaked a bit after public comment and others go through as is."
(full article at link)