Restaurants

Is Trump Really Trying to Steal Employees' Tips?

The latest hysterical overreaction to a regulatory rollback

|

Monkey Business Images/Dreamstime

Just about every regulatory rollback is greeted by handwringing and hysteria these days. So we shouldn't be surprised by the reaction to the Department of Labor's announcement that it plans to partially repeal an Obama-era rule prohibiting restaurants, bars, and other hospitality businesses from tip pooling—the practice where management collects the tips and then distributes a fixed percentage to cooks, busboys, and other "back-of-the-house" staff.

"Trump Wants You to Tip Restaurant Owners, Not Servers," declares Newsweek. "Proposed rule would protect employers who steal workers' hard-earned tips," says the Employment Policy Institute (EPI), a left-tilting think tank.

By legalizing tip pooling, these groups say, employers will be allowed to vacuum up the tips intended for their employees, something the EPI estimates will cost workers $6.1 billion a year in tips.

All of that sounds pretty bad. It's also not true. To understand why, you have to start with the basics.

Under the current Obama-era rule, employers are prevented from pooling tips among employees not in the "chain of service," meaning employees who don't interact directly with the customer. That includes cooks and busboys, but also managers, supervisors, and owners.

Before this rule was issued by the Department of Labor in 2011, restaurants in 43 states were prohibited from tip pooling. Some restaurant operators had been using "tip credits", or crediting tips their servers earned toward their requirement to pay the minimum wage. Since the 1970s, federal law has prohibited tip credit businesses from tip pooling.

In those states, the imposition of the 2011 rule had no effect, and its repeal will have no effect, says Anthony Anton of the Washington Hospitality Association, a trade group for hotes and restaurants in Washington state. "In the vast majority of states this is a non-issue," he said. Employers claiming a portion of an employee's tips "won't be legal there, whatever the rule."

This is missing from EPI's analysis, which gets its $6.1 billion estimate assuming all tips paid above a state's minimum wage could potentially be taken by employers, regardless of whether a business is currently using a tip credit model or not. These businesses used a tip credit model before Obama's 2011 rule and they'll probably continue to do so after it's gone.

The repeal will mean something in seven western states where tip credits are forbidden, and businesses were previously able to engage in tip pooling.

The repeal of the 2011 rule would allow these businesses to begin tip pooling again but, crucially, most of these tips will be off-limits to employers. That is because of state-level rules that forbid managerial staff, and owners from receiving any tips.

Washington state law forbids this. California's does as well. That leaves five states that could potentially see employers sharing in a cut of tips, something many will be reticent to do out of a desire to reward teamwork or to avoid worker dissatisfaction.

That's a far cry from the Newsweek piece claiming this rule change will "ripple across the economy, hurting families and local businesses and placing new demands on social service programs."

The rule change will, instead, allow restaurants, whose employees might already be sharing their tips with the back of the house informally, "to have a consistent manner in how it deals with" tip pooling, Anton says.

As with most deregulatory actions, Trump's proposal to allow for greater tip pooling is a minor change to a short-lived rule that has since been blown for out of proportion by activists and the press.

Servers and restaurant customers alike should not buy the hype.

Advertisement

NEXT: Cops Catfish Obese Gay College Student Then Arrest Him for Multiple Felonies

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. So, is this actively malicious reporting or actively moronic reporting?

    1. No reason it can’t be both at the same time

    2. Socialists are prone to believing their own bullshit, but they’re not above lying for The Cause. This case seems to be the former.

  2. I’m actually bothered by this article, because I first heard about this on the radio Monday, and they literally said the ruling would require tip pooling. Not allow it, require it.

    That just means I was lied to this week. And that’s bullshit.

    1. #SocialistsLiePeopleDie

  3. Also, it seems ironic that these left leaning think tanks are so upset for with allowing a microcosm of Communism to be implemented.

    1. “There you go again!”

    2. Well, you know Communism is supposed to only mean that they receive things from other people. Not that those people who support communism have things taken from them to give to others.

      That’s basically the majority of American’s who support that type of idiocy. They never think they’re the one’s who will have their shit taken.

      1. Well, I think you have two major groups there. Lower income people who think they should get more free shit. And richer lefties who I am sure know that what they are pushing for means more taxes for them at least.

    3. It’s because they’re afraid the capitalist owners will take the tips for themselves.
      As usual, socialists fear the behavior of capitalists because they don’t understand the incentives capitalists face. That’s why they’re dumb enough to think the government can manage an enterprise with less corruption.

  4. The document with the proposed rules specifically state that it would be legal on the federal level for employers to pocket all tips. If all they wanted to do was legalize tip pooling they would have done it differently. So yes, the Trump administration is trying to allow employers to steal tips. The fact that it would still be illegal in most states does not change anything.

    1. The article discussed this. What is your opinion on their statements?

      1. OMG BUCS, you can’t just ask people to read! Molly might be illiterate!

        That would require Molly the read the article, understand it, and form competent thought. And you know perfectly well that rigor is “white male heterosexual privilege.”

      2. The article only makes a passing reference to the ability of employers to take all tips and ignores that the proposed rules specifically allow it. Given the title of the article, it is a glaring omission.

        1. The repeal will mean something in seven western states where tip credits are forbidden, and businesses were previously able to engage in tip pooling.

          The repeal of the 2011 rule would allow these businesses to begin tip pooling again but, crucially, most of these tips will be off-limits to employers. That is because of state-level rules that forbid managerial staff, and owners from receiving any tips.

          Washington state law forbids this. California’s does as well. That leaves five states that could potentially see employers sharing in a cut of tips, something many will be reticent to do out of a desire to reward teamwork or to avoid worker dissatisfaction.

          It get’s three paragraphs, about 20% of the article. What is your opinion? Because right now all you’re doing is attempting to make an off-handed accusation of bias and attempting to hide something in their report. This is not true. If you disagree with the conclusions, do so explicitly and argue a point other than making an incorrect allusion.

    2. No one seems interested in asking why servers are allowed to be paid way below the supposedly ‘minimum wage’ and are expected to survive on the generosity of idiots. All the details surrounding how they’re forced to share their tips that are given explicitly for the service they provide is avoiding a question you’d think they would be asking.

      I mean, I personally don’t give a shit but you would think all those SJW would have railed against the Obama administration for not making them all minimum wage employees since that is their version of ‘fair’.

      1. No server is ever paid below minimum wage, every server is guaranteed minimum wage, if their hourly wage and tips do not equal more than the minimum wage for the hours they worked the business has to make up the difference. That is a law in every state and maybe even at the federal level.

        Now do some make below minimum wages? I imagine it happens due to ignorance of the law protecting them and a shitty owner, now compare this to the amount of tip earners who do not fully report their earnings to the IRS. Do you think wait staff fully report their earnings in tips? I don’t think they do and I don’t care, I just don’t want to hear them bitch about their wages when they are able to hide cash payments (tips).

      2. No server is ever paid below minimum wage, every server is guaranteed minimum wage, if their hourly wage and tips do not equal more than the minimum wage for the hours they worked the business has to make up the difference. That is a law in every state and maybe even at the federal level.

        Now do some make below minimum wages? I imagine it happens due to ignorance of the law protecting them and a shitty owner, now compare this to the amount of tip earners who do not fully report their earnings to the IRS. Do you think wait staff fully report their earnings in tips? I don’t think they do and I don’t care, I just don’t want to hear them bitch about their wages when they are able to hide cash payments (tips).

      3. Broadly speaking, libertarians are against minimum wage laws (state or federal) to start with, so I’m not sure why you think folks here would care.

      4. No one seems interested in asking why servers are allowed to be paid way below the supposedly ‘minimum wage’ and are expected to survive on the generosity of idiots.

        I spent about 30 years (on-and-off) working in F&B in every position except head cook (I did a summer as prep-cook, though). A couple things to understand:

        1) Most servers aren’t doing it full time. It’s a second job, beer money for a college student, or pin money for a mom whose kids are in school.

        2) Tips are a market force which is actively beneficial for the customer. Bad servers make bad tips–resulting in them quitting because of the low pay. Good servers make good money and stay

        3) Good servers make good money. I worked at my sister’s small supper club on Fridays only. I would work for 4 hours and make $150-200 (small-town Wisconsin); that paid my gas, electric, water, phone, and internet bills for the month and still enough to put some good beer in the fridge. That was 16 hrs per month. For comparison, my hourly wage (for waiting tables) was comparable with a physicians assistant or veterinarian.

    3. The fact that it would still be illegal in most states does not change anything.

      So it’s a state’s rights issue but it’s all Trump’s fault. Got it.

      1. The article is about the proposed federal rules, and the writer is relying on state laws to demonstrate that the rules will not lead to employers pocketing the tips.

        1. So it’s still a state’s rights issue.

        2. BECAUSE IT WAS ALREADY ILLEGAL IN 43 STATES.

    4. it would be legal to pocket all tips, but so what? If they’re doing that, they will have to pay their employees higher wages to keep them. The market clearing wage is what is going to determine how much and whether employers keep tips.

      1. If you think it is fine for employers to keep all tips would you agree or disagree with whether that policy should be disclosed to customers?

  5. I was under the impression that tip pooling was standard business practice. Sharing tips with the cooks and bussers seems fair, although it does seem unfair if managers and supervisors (and the owner!) are taking a cut.
    But this seems like just the sort of practice that would quickly get weeded out by employee dissatisfaction. Ultimately compensation is set by the market – employees ( bussers and cooks included) are going to seek the jobs where the combination of tips and wages is competitive compared to other businesses. If the waitrsses take home pay is reduced by tip pooling employers will have to set a higher wage, and same for everyone else. The distribution of pay for good service to cooks and bussers sounds fair since the quality of the food and cleanliness of the table is part of the dining experience. I have often tipped because I thought the food was exceptional, under the assumption that some of it would go to the cook.

  6. “Proposed rule would protect employers who steal workers’ hard-earned tips,”

    That’s not tip-pooling.

    Also, it’s almost like regulations passed by one admin. can be repealed by another because regulations are not laws.

  7. Cooks and bartenders are paid more than servers so they should not get part of the servers tips they get for SERVING.

  8. It seems like Christian is saying that moving from a rule that makes it impossible for employers to steal employees tips to a rule where it is possible (in a handful of states) is somehow a step forward, or a trivial change.

    1. I can see how going back to the harrowing days of 2010 could be more than trivial. If you’re a moron.

  9. The “43 states” link doesn’t mention anything about tip pooling being illegal in 43 states. The only thing it says is:

    “The federal minimum wage is 7.25 an hour. But in 43 states employers are allowed to pay tipped workers less ? some as little as $2.13 an hour, a federal wage which has not increased in 25 years.”

    how do you get from that to:

    “Before this rule was issued by the Department of Labor in 2011, restaurants in 43 states were prohibited from tip pooling. Some restaurant operators had been using “tip credits”, or crediting tips their servers earned toward their requirement to pay the minimum wage.”

  10. More breathless TDS bu;;sh%t. Pooling tips to provide the dishwashers and buss people a slice is hardly anything new. In fact where I once worked as a dishwasher 50 years ago, it was a waitress initiative.

Please to post comments

Comments are closed.