Beating the Department of Labor to the punch, Congress incorporated a provision that prevents employers from taking tips from their employees into the recently passed omnibus spending bill (known as the Consolidated Appropriations Act).
In December, the DOL announced a new rule that, if implemented, would permit a practice known as “tip-pooling,” which allows employers to force workers to share tips with untipped employees. Tip-pooling, under the proposed DOL regulation, would also allow employers to take tips for themselves when workers are paid minimum wage or more. But with the passing of the spending bill, that rule has been partially preempted, and the Fair Labor Standards Act (FLSA) has been amended. It now contains the following provision: “[a]n employer may not keep tips received by its employees for any purposes, including allowing managers and supervisors to keep any portion of employee’s tips, regardless of whether or not the employer takes a tip credit.”
The DOL rule could still go forward, except instead of allowing employers to take tips, it would simply permit employers to require workers to share tips with back-of-house (or untipped) employees.
The FLSA amendment has received praise from both workers and employers. The National Restaurant Association has been pushing for the rescission of a 2011 rule that prohibited tip-pooling altogether, vying for an option that allowed back-of-house employees to receive some of the pulled tips. And worker organizations have obviously feared a regulation that would permit de facto wage theft, which the new provision prevents.
Restaurateurs have been less interested in wage-theft and more interested in balancing their books with evenly distributed tips. With such a practice in place, restaurant owners are able to keep more back-of-house employees and maintain balanced wage levels between back-of-house workers, who are often Latinx, and front-of-house waiters, who are often white. The Restaurant Association took issue with the Obama administration’s 2011 rule, which defined tips as the property of the waiter who earned them, arguing that the regulation represented a breach of executive powers. The Association pointed to a Ninth Circuit ruling that explicitly permitted the practice of tip-pooling in certain cases.
Restaurant workers, for their part, were content with the spending bill’s revision, highlighting the fact that the DOL rule would not have prohibited employers (including supervisors and managers) from keeping tips. Moreover, workers were understandably worried about the $5.1 billion in lost tips – a number reported by the Economic Policy Institute (EPI). Front-of-house workers may still be upset at the omnibus bill’s implicit allowance of a more limited tip-pooling practice, which still requires waiters to spread the wealth in order to fix certain (racialized) wage disparities. Critics of this perspective argue that this puts the onus on the workers to redress wage issues. As an alternative, restaurateurs could be expected to raise the wages of back-of-house workers, but owners often lament that this is impossible given the specific economics of restaurants.
The tip-pooling provision was the result of a bipartisan collaboration between Democratic Senator Patty Murray (Washington) and DOL Secretary Alexander Acosta, who ignored certain data when promulgating the Labor Department’s rule. After pressing Acosta for months, Murray said she was happy with the cabinet member’s willingness to compromise. “I’m pleased that Secretary Acosta listened, reversed course, and worked with me on legislation to make sure that big businesses can’t steal their workers’ tips,” she said. “For the millions of workers who rely on their tips to pay their bills and support their families, most of whom are women, this change comes as a sigh of relief.”
Other Democrats, such as Representative Mark Takano, have been less cheery about the bill. “It does prevent outright wage theft, but it still undermines the basic principle that tips are the property of the worker who earns them,” said Takano’s spokesperson, Josh Weisz.
In the end, as pointed out by the Economic Policy Institute, the new provision is certainly better than the proposed DOL rule. At least, owners won’t be able to steal tips with impunity.