Rule Change Could Give Restaurants More Control Over Workers' Tips

Dec 14, 2017
Originally published on December 15, 2017 11:33 am

Americans are big tippers.

Every year, we leave more than $30 billion in tips, mostly in restaurants but also casinos, nail salons and other service businesses.

Traditionally, the owners of those businesses have not had much control over how tips are distributed. But a proposed rule from the Trump administration could change that.

"This rule has really been pushed by the restaurant industry," said Heidi Shierholz, chief economist for the Labor Department during the Obama administration. "They really want to get control of tips. They've finally found an administration that will do it for them."

Restaurant owners are promoting the rule change as a way to address long-standing inequities in pay between servers and kitchen staff.

"Cooks historically and even today have always received the short end of the stick in terms of the tip world," said Kurt Huffman, who runs more than two dozen restaurants in Portland, Ore.

Kitchen workers in his restaurants earn starting wages of about $13.50 an hour. With tips, servers can earn two or three times as much.

Huffman tries to compensate by encouraging servers to share a portion of their tips with cooks and dishwashers.

"We've tried to be very, very careful in just communicating the fact to our servers and our bartenders that our kitchen is a critical part of our business," Huffman said. "It is, in fact, the motor that runs the business."

He said most servers are happy to comply.

"You don't want to be known as the guy or the girl who stiffs the kitchen," he said. "The cooks are going to find out and that's just bad news for you and your table. So there's a certain common sense to it."

But under current federal rules, any such tip sharing with kitchen staff must be voluntary, unlike tip pools with busboys and hostesses, which employers are allowed to mandate. As a result, the shared tips add only a few dollars to kitchen workers' pay, and Huffman often struggles to find qualified cooks and dishwashers.

If the proposed Labor Department rule goes through, restaurant owners would have more control over tips and could redirect more money to kitchen workers.

"I think all of us see this as a way to reallocate the tips a little bit more fairly," Huffman said. "And it's nice from an ownership perspective to feel like finally we have an opportunity to truly decide where these tips go."

But critics warn the proposed rule would give restaurant owners too much leeway.

"As long as employers pay their workers the full minimum wage, they then take full control over the tips above that, and can do whatever they want to with them, including simply pocket them," says Shierholz, who's now with the Economic Policy Institute, a left-leaning think tank.

"The issue that I have with tip pooling is not that I'm sharing the tips," says former waitress Misty Cumbie. "It's that the owner would have control over the tips."

"I think in general people assume that the money that they're leaving is for the server or the person behind the counter," Cumbie says. "And definitely not for the owner."

Cumbie, who has worked as both a waitress and in the kitchen, agrees that cooks and dishwashers deserve higher pay. But she says that money shouldn't come from the pockets of servers.

Cumbie sued a former employer who insisted servers share the bulk of their tips with kitchen staff. The federal court initially ruled against her, finding that employers may take control of tips so long as servers are paid the minimum wage. The Obama administration then issued a rule making it clear that tips belong to the worker who receives them, whether that worker is paid minimum wage or not.

The Trump administration is now preparing to reverse that with its own rule.
The Labor Department has already received thousands of comments on the proposal. Its final decision may determine who keeps the money you leave as a tip.

NPR RAD researcher Jane Gilvin contributed to this story.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

KELLY MCEVERS, HOST:

Every year, Americans leave more than $30 billion in tips, mostly at restaurants but also at casinos, nail salons and elsewhere. Traditionally, the owners of those businesses have not had much control over how tips are distributed. But the Trump administration is proposing a rule that could change that. NPR's Scott Horsley has more.

SCOTT HORSLEY, BYLINE: OK, so you're out at lunch, maybe it's a fancy restaurant, white tablecloths, maybe it's the neighborhood diner. Either way, the bill comes, you pull out your wallet. And in addition to paying the tab, you leave something extra. Up until now, the federal government has had a pretty clear position on who that tip belongs to.

HEIDI SHIERHOLZ: The law of the land now is that the tip belongs to the workers who earn the tips, full stop.

HORSLEY: That's Heidi Shierholz, former chief economist for the Department of Labor. And I have invited you to lunch to talk through this because now those tips are at the center of a big legal and regulatory tug of war.

SHIERHOLZ: The department has just released a proposed rule. The main point of this rule is to allow employers to take control of workers' tips. And this rule has really been pushed by the restaurant industry.

HORSLEY: Kurt Huffman is a part of that restaurant industry. He got his start when he was just a freshman in high school.

KURT HUFFMAN: Like I said, I was 15 at the time. So I started washing dishes and then became a line cook.

HORSLEY: Today, Huffman runs more than two dozen restaurants in Portland, Ore. And one of his frustrations is that the people who work in the kitchen often make a lot less than the servers out front. Huffman has tried to compensate by encouraging servers to share their tips with kitchen staff, just as they already do with busboys and hostesses. Most, he says, are happy to go along.

HUFFMAN: We've tried to be very, very careful in just communicating the fact to our servers and our bartenders that the kitchen is a critical part of our business. It is, in fact, the motor that runs the business.

HORSLEY: But Huffman says this voluntary tip sharing only boosts cooks' pay by a few dollars an hour. And he's constantly wrestling with staff shortages in the kitchen. If the proposed Labor Department rule goes through, Huffman could divert more servers' tips and pay kitchen workers more.

HUFFMAN: I think all of us see this as a way to reallocate the tips a little bit more fairly. And it's nice from an ownership perspective to feel like finally we have an opportunity to truly decide where these tips go.

HORSLEY: Critics say the new rule would even allow restaurant owners to pocket the tips themselves. Former waitress Misty Cumbie says that's not what most customers have in mind.

MISTY CUMBIE: I think in general, people assume that the money that they're leaving is for the server or the person behind the counter and definitely not for the owner.

HORSLEY: Cumbie's been working in restaurants off and on since she was 17, and she's seen this tipping issue from both sides.

CUMBIE: You know, I worked in the kitchen for a long time as well, and I understand the challenges of doing that work.

HORSLEY: She agrees with Huffman that kitchen workers deserve higher pay but not, she says, at the expense of servers. When a former employer tried taking the bulk of Cumbie's tips to pay kitchen staff, she sued. And in 2011, the Obama administration issued a rule making it clear, tips belong to the workers who earn them. The new proposed rule from the Trump administration would reverse that, so long as restaurants pay servers at least a minimum wage. That makes Cumbie worried.

CUMBIE: To me, anyway, it doesn't appear that this is really about equity as much as it is about large restaurant conglomerates seeing that they can line their pockets.

HORSLEY: The Labor Department has already received thousands of comments on its proposed rule. Its final decision may determine who keeps the money you leave as a tip. Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.