New Rule By Trump Essentially Legalizes Restaurant Wage Theft

Eric Heath/Flickr

The rule change would shift ownership of tips from employees to employer.

President Donald Trump's Department of Labor is preparing to undo an Obama-era regulation prohibiting restaurant tips from being shared between those who work the front and back of the establishment, essentially limiting the tips to servers, bussers, and bartenders and limiting cooks and dishwashers to their hourly wages.

Critics argue that numerous problems arise by allowing tips to be shared, not the least of which being management's ability to keep tipped money for itself.

Under current law, restaurant employers can take a tip credit, paying front-of-house workers less than minimum wage so long as tips make up the difference. Back-of-house employees must be paid minimum wage.

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.

Many who are open to the change would like to see a provision to close this loophole, arguing that concern for all workers within the restaurant means ensuring that managers are not able to steal tips - especially in an industry where wage theft is already problematic.

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.

But not all are interested in protecting workers:

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.