The Trump Administration Wants to Change the Way Tips Work. Here’s What You Need to Know
President Trump’s Labor Department wants to change the way workers get tipped.
In December, the department, led by Secretary Alexander Acosta, announced a proposed rule-change that would give business owners more control over the tips their employees make. Although tips are common in many professions, the discussion around the proposed rule-change has primarily focused on restaurant workers. Here’s what you need to know:
What Is the Proposed Tip Rule?
A 2011 rule under the Fair Labor Standards Act means restaurant owners can only require tipped employees to participate in tip pools if the pool is only shared among traditionally tipped workers—typically servers, bussers, and bartenders, or “front of house” staff. Under the proposed rule change, business owners would be allowed to require tip pooling and use pooled tips for any purpose, provided employees have been paid the federal minimum wage.
The rule would not apply to employers who currently use a tip credit, meaning that tips comprise a portion of the employee’s minimum wage. Employers who use the tip credit are required to pay their employees $2.13 per hour, or the amount required to make up $7.25 per hour.
Why Does it Matter?
The Trump administration is framing the proposed change as a boon to “back of house” workers such as cooks and dishwashers who can’t share tips under the 2011 rule. However, critics, including some in the restaurant industry, say in practice the new rule will amount to wage theft.
The Department of Labor estimates there are 1.08 million tipped servers (waiters and waitresses) and more than 200,000 tipped bartenders across the United States. While local regulation will mean not all of these workers are affected, the Economic Policy Institute estimates that tipped workers would lose $5.8 billion per year in tips that could be pocketed by their employers. The Department of Labor did not offer its own economic impact analysis, but Bloomberg Law reported that top Labor officials intentionally suppressed internal analysis that showed the rule change would have a negative impact on tipped workers.
What Happens Next?
When the Department of Labor formally introduced the proposed rule change on Dec. 5, they initially set a 30-day period of public comment. On Dec. 15, the public comment period was extended to 60 days, ending Monday, Feb. 5. If the rule goes into effect, it is likely to face challenges in court.
The standing 2011 rule has received court challenges of its own. According to Reuters, the U.S. Supreme Court is already considering whether to review a challenge to the 2011 tip-pooling ban from the National Restaurant Association and others.