A new rule proposed by the Department of Labor could change how tips are distributed in bars across the country. If the regulation is passed as is, some bar owners could collect tips and either distribute them to the staff as the owner sees fit, or keep the tips for the business.
The change was first announced in July. It would reverse a 2011 rule by the Barack Obama-led Department of Labor that prohibits tips from going to anyone other than the bartenders and waitstaff to whom the tip was given. The new guidelines will go into effect after a mandatory 30-day public comment period that ends on January 4, 2018.
The National Restaurant Association and other people who agree with the change say that it could create more income equality between front and back of house, Eater reports. Opponents like the Restaurant Opportunities Center United (ROC United) say that it could increase labor costs and would allow unscrupulous owners to pocket the money themselves. ROC United also argues that the rule would “allow Donald Trump, the owner of multiple businesses that employ tipped workers, to keep and profit from his employees’ tips in all of his various businesses.”
Understanding the rule change starts with understanding the Fair Labor Standards Act (FLSA). The FLSA states that workers must be paid, at least, the federal minimum wage of $7.25 an hour. Tipped employees, however, have a tip credit, and only must be paid at least $2.13 an hour, as long as the amount of tips they receive can compensate for the lost wage revenue. Some states have a higher minimum wage, but the standard operates in the same way.
The rule change wouldn’t impact all bartenders equally. Some states, including California and New York, have laws prohibiting employers from keeping employee tips. In those cases, owners must comply with state law. However, owners could still distribute the tips among the entire staff.
The Department of Labor used information from the Bureau of Labor Statistics to guide the new policy policy. According to the public comment document, there are 40,095 drinking establishments and 357,727 bartenders. Around 30 percent of bartenders and waitstaff, the Department of Labor estimates, work in states that prohibit employers from keeping their tips.
“I would hope that you could trust the restaurant managers to share tips without having to worry about theft, but I would be concerned,” Corey Gammon, a server at an Olive Garden in Georgia, told Eater. “Leaving it up to management would cause so much suspicion with servers. I would feel very uneasy about that.”