On Monday, the U.S. Department of Labor proposed a new tip pooling rule that would expand the number of employees eligible for tip pooling to include more back-of-house workers and potentially managers. If this proposal moves forward, it would rollback the 2011 regulation from the Obama administration that made tips the property of guest-facing workers. While move is being lauded by some in the industry as a way to close the income gap between front-of-house and back-of-house employees, others have concerns.
Though the Fair Labor Standards Act (FLSA) stipulates that the national minimum wage is $7.25, this legislation also says that tipped employees can be paid a “tipped minimum wage” of $2.13 per hour if the tips bring the wage up to the required $7.25 rate. Many servers end up making more per hour than the minimum wage when tips are factored. Back-of-house teams, such as cooks and dishwashers, however, have not been eligible to receive tips under the Obama-era rule, and many have earned less than their guest-facing colleagues.
If this new rule is passed, back-of-house employees would once again be considered tipped employees, and employers would have more flexibility in how they pay workers. Advocates of this rule see this proposed change as a way to ensure that these employees who also contribute to customer experience are compensated fairly. Additionally, increasing wages for these workers could also help reduce turnover.
“We applaud the Department of Labor’s review of tip regulations,” says Angelo Amador, executive director of the Restaurant Law Center. “We look forward to submitting comments from the restaurant industry on the new rulemaking.”
Opponents, however, worry about a provision that would allow some employers to keep tips rather than pay them out to staff. Since the 2011 rule, employers take tip credits, pay the tipped minimum wage of $2.13 plus tips, and pay back-of-house employees the federally mandated $7.35 per hour. However, Eater reports that this rule would allow employers to forgo the tip credit and pay all employees the full minimum wage of $7.25 per hour. This would then allow employers to decide whether or not to split tips between front- and back-of-house, or to not pay out tips at all and keep them for the business.
Another concern is that in states that don’t have their own laws stipulating how tips must be shared in restaurants, diners may not know how their tips will be distributed.
Though opinion is divided, the rule is currently published in the Federal Register and will be open for public comment for 30 days before it the DOL moves forward. More information about commenting can be found on the DOL’s website.