Under a Labor Department rule change proposed Monday, employers could ask employees who earn a salary of at least the federal minimum wage of $7.25 per hour, and also earn tips, to pool the tip money and share it with colleagues who don’t earn gratuities. That practice was barred in 2011 by President Obama’s Labor Department, which said that tips belonged to the employee who earned them, and could only be legally pooled with other employees who received tips.
The restaurant industry cheered Monday’s decision, while workers’ rights groups said it would leave many who work at restaurants, hotels and bars with lower pay.
According to the Labor Department, the rule change will help workers who don’t directly interact with customers and often make less money, like restaurant cooks and dish washers.
“These ‘back of the house’ employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers,” the agency said in its announcement.
But the National Employment Law Project, a progressive group, said the move would give employers too much discretion over how to allocate the tips their workers earn.
“Tips belong to the workers who have earned them — period. But today the Trump Labor Department has proposed a pathway for employers to keep the tips for themselves,” NELP director Christine Owens said.
The organization pointed to a line in the Labor Department document, which specifically says that managers could use pooled tip money to make structural improvements, like expanding the dining area, or to lower menu prices.
“Crucially, the rule doesn’t actually require that employers distribute pooled tips to workers,” said Heidi Shierholz, senior economist at the left-leaning Economic Policy Institute, in a statement.
Democrats have also come out in opposition to the rule change.
“The Trump Administration’s proposed rule would allow employers to pocket employees’ hard-earned tips as long as they pay tipped workers the woeful federal minimum wage of $7.25 per hour,” said Rep. Bobby Scott, the ranking Democrat on the House Education and Workforce Committee, in a statement. “Regardless of proponents’ claims, nothing in this proposed rule would require employers to redistribute tips to workers.”
The new rule isn’t final, and still needs to go through a 30-day public comment period. The Trump administration stopped enforcing the existing rule in July.
The 2011 provision was loathed by restaurant groups from the start. The National Restaurant Association sued the Labor Department shortly after the regulation took effect, claiming it would have a large economic impact on the industry.
The case was appealed to the Supreme Court earlier this year, but the bench hasn’t decided whether or not to hear the case.
On Monday, the Restaurant Law Center, an arm of the National Restaurant Association, put out a short statement in favor of the Trump administration’s new rule.
“We applaud the Department of Labor’s review of tip regulations,” Executive Director Angelo Amador said. “We look forward to submitting comments from the restaurant industry on the new rulemaking.”