Restaurant Owners and Managers Getting Share of Tips Too Much for Congress to Swallow

photo-new-tip-rule-300x225When you give a tip at a restaurant you may do so out of habit or you may want to reward particularly good service by wait staff. Either way you probably don’t have in mind putting money in the pockets of restaurant owners, supervisors or managers. The Trump administration proposed a regulation allowing just that. It was panned by the critics in Congress, who as part of the federal government’s most recent budget compromise made changes to tipping, but nothing that radical.

The original proposal encountered strong opposition from many working in the restaurant industry, reports the New York Times. Labor advocacy groups claimed the proposed regulation would’ve shifted billions of dollars from workers to employers.

The restaurant industry claimed it would’ve allowed the tips given to waiters and waitresses to be shared with those working in “the back of the house” such as cooks and dishwashers. There were no such limitations in the proposal, owners were free to keep or split the tips however they saw fit.

Federal law is now clear employers, supervisors and managers cannot keep any portion of the tips earned by their workers. Tips could be split with non-tipped workers if employees are paid the regular minimum wage in their jurisdiction, as opposed to the lower tip wage.

Although restaurant owners now have more freedom to spread tips around, they need to be careful about how that’s done. The Secretary of Labor now has more authority to impose civil penalties on employers stealing tips. Workers need not show tip theft was repeated or willful as they’ve had to do in the past. Now civil penalties could be applied to any instance of tip theft. The new rules also cover tipped employees in other industries including hairstylists and manicurists.

Tip sharing can be seen as Robin Hood taking money from well tipped wait staff to increase the wages of the sweaty and stained workers in the kitchen who make those tips possible or robbing Peter in the front of the house to pay Paul in the back of the house. Some wait staff earning substantial tips could end up losing income but the hope is the restaurant workforce in general will benefit.

Restaurant owners are seeing booming times due to a strong economy and more people eating out. These businesses can generate strong earnings but only if they have enough qualified staff to do the job. Restaurants are having a harder time keeping and attracting staff because of the increased demand for workers, according to the New York Times. The National Restaurant Association states that 37% of its members reported that labor recruitment was their top challenge in 2017, up from 15% the previous year.

Unless management can solve the puzzle of having enough people on staff splitting tips may just be a quick fix to increase wages of workers in the kitchen, a re-arrangement of the deck chairs on a Titanic business model kept afloat on a sea of low prices and wages.

If you have any questions about workplace law or need representation in a legal dispute concerning treatment of employees, contact our office so we can talk about the issue, how the law may apply and what you can do to protect your legal rights.