A proposal from the Trump administration that would overturn a ban on workers pooling tips has faced backlash and praise with opponents ramping up their efforts Tuesday.
The Department of Labor (DOL) was quickly met with criticism when it first announced the proposed rule Dec. 4. The rule is designed to allow workplaces to share tips among employees – with the intent of decreasing wage disparities between tipped and non-tipped workers. But critics contest the plan would allow for abuse.
The DOL proposal would allow employers to require tipped workers to share the tips they earn with workers that don’t typically collect tips, like cooks and dishwashers. Former President Barack Obama’s administration first banned the practice in a 2011 rule – arguing that previous regulations were out of date because of legislative changes over the years.
Democrats and progressive activists have been mounting a fight against the decision by the new administration to overturn the ban – with those efforts ramping up in recent days. Labor unions and progressive activist groups, for instance, held an event this week on Capitol Hill in opposition to the proposal.
The Restaurant Opportunities Centers (ROC) hosted the event Tuesday alongside unions and other activist groups. Sen. Jeff Merkley of Oregon and Rep. Keith Ellison on Minnesota, both Democrats, spoke at the event to express their concern with the proposal. Ellison argued that the proposal would give employers the ability to control who gets tips and how much.
Labor unions and other activists are also encouraging people to express their opposition to the rule by submitting comments to federal officials – with the proposal currently undergoing a part of the rulemaking process that allows for public comments. Those opposition groups even setup a webpage that allows people to more easily submit comments.
The Economic Policy Institute, a progressive research nonprofit, released a report Tuesday arguing the proposal would allow employers to legally pocket tips at an estimated $5.8 billion annually. The National Employment Law Project released a statement the same day claiming the rule would allow for wage theft in tipped industries.
The DOL originally set the public comment period to end Jan. 4 – but it was extended Tuesday by an additional 30 days. The ROC touted the announcement as a victory for its side, noting the decision was made after tens of thousands of comments were submitted that urged the agency to extend the comment period.
The National Restaurant Association (NRA) has been leading a coalition of other industry groups against the rule banning tip pooling. They have since petitioned the U.S. Supreme Court to hear their lawsuit against the ban. The Restaurant Law Center (RLC), a project of the NRA, praised the new proposal to overturn it.
“We applaud the Department of Labor’s review of tip regulations. We look forward to submitting comments from the restaurant industry on the new rulemaking.” RLC executive director Angelo Amador said in an earlier statement provided to InsideSources.
The Fair Labor Standards Act (FLSA) allowed employers to use tips as a credit against a worker’s minimum wage obligations when it was enacted in 1966. The tip credit essentially permits an employer to pay tipped workers below the minimum wage so long as the gap was bridged with tips.
Littler Mendelson, an employment law firm, explained in a report Dec. 4 that lawmakers later amended the law with a requirement that employees retain all tips, except when there is tip pooling among workers that are getting at least the federal minimum wage.
The Obama administration later changed the standard again by prohibiting the distribution of tips to anyone other than the workers who directly earned them. The administration at the time expressed concern that employers could use the practice to offset minimum wage obligations of employees who don’t receive tips.
Editor’s Note: The EPI report originally said the proposed rule would allow employers to legally pocket tips at an estimated $6.1 billion annually. The update was due to a revised analysis of state laws prohibiting employers from pocketing tips.
