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New Rules on Tip Pooling From the Trump Administration

If you are a server, you believe tips you receive belong to you.  If you own a restaurant, you probably believe tips belong to the business.  It’s a matter of perspective.

A couple of weeks ago, the Trump Administration proposed a change in federal labor law that changes the way restaurants handle tip pools.

As of right now, tip pools that aim to pay back of the house workers (cooks, dishwashers, etc) are illegal.

Typically, restaurants take advantage of the tip-credit to meet minimum wage requirements.  That is where the employer pays tipped employees $2.13 per hour, and uses the tip credit to apply tips towards the federal minimum wage of $7.25.  If this is the case at your place of employment, then nothing will change.

If an employer pays all employers at least the federal minimum wage, then the proposed rule will allow them to pay a part of the tip pool to employees who are traditionally not tipped such as back of the house employees.  Employers that do pay a wage of $7.25 will not be required to tip pool, but this new rule will allow it.

This is a change from the 2011 rules issued by the Obama Administration.  Those rules stated “Tips are property of the employee whether or no the employer has taken the tip credit.”  Currently, the only legal tip pool is one that distributes the tips with employees who are traditionally tipped such as servers, bartenders, hosts, etc.

Supporters of the new rule claim that tip pooling will decrease wage disparities among all employees who contribute to the customers’ experience and to incentivize all employees to improve that experience regardless of their position.  They claim that when you tip, you are only rewarding the staff members that brought your food.  Supporters claim this overlooks dishwashers and cooks.  They claim that tipped employees are making 250% of what they made 30 years ago while back of the house staff have seen income increases in the 20% range.

Opponents of the new rule claim that this will give the employers control of all tips in the restaurant, and will lead the way of employers creating a tip pool for all employees.  Opponents also claim that no one will know what happens to the tips once they are pooled.

As part of the federal rulemaking process, the Department of Labor will accept comments on these rules until February 5th, 2018.  Any member of the public can comment.  Follow the link below to submit your comment to the Department of Labor.

https://www.federalregister.gov/documents/2017/12/05/2017-25802/tip-regulations-under-the-fair-labor-standards-act-flsa#open-comment

 

If your employer has a tip pool that includes back of the house, please contact us for help.

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