Most Americans assume that when they leave a tip for waiters and bartenders, those workers pocket the money. That could become wishful thinking under a Trump administration proposal that would give restaurants and other businesses complete control over the tips earned by their employees.
The Labor Department recently proposed allowing employers to pool tips and use them as they see fit as long as all of their workers are paid at least the minimum wage, which is $7.25 an hour nationally and higher in some states and cities. Officials argue that this will free restaurants to use some of the tip money to reward lowly dishwashers, line cooks and other workers who toil in the less glamorous quarters and presumably make less than servers who get tips. Using tips to compensate all employees sounds like a worthy cause, but a simple reading of the government’s proposal makes clear that business owners would have no obligation to use the money in this way. They would be free to pocket some or all of that cash, spend it to spiff up the dining room or use it to underwrite $2 margaritas at happy hour. And that’s what makes this proposal so disturbing.
The 3.2 million Americans who work as waiters, waitresses and bartenders include some of the lowest-compensated working people in the country. The median hourly wage for waiters and waitresses was $9.61 an hour last year, according to the Bureau of Labor Statistics. Further, there is a sordid history of restaurant owners who steal tips, and of settlements in which they have agreed to repay workers millions of dollars.
Not to worry, says the Labor Department, which argues, oddly and unconvincingly, that workers will be better off no matter how owners spend the money. Enlarging dining rooms, reducing menu prices or offering paid time off should be seen as "potential benefits to employees and the economy overall." The department also assures us that owners will funnel tip money to employees because workers would quit otherwise.
The Trump administration appears to be rushing this rule through — it has offered the public just 30 days to comment on it — in part to pre-empt the Supreme Court from ruling on a 2011 Obama-era tipping rule. The department’s new proposal would do away with the 2011 rule. The restaurant industry has filed several legal challenges to that regulation, which prohibits businesses from pooling tips and sharing them with dishwashers and other back-of-the-house workers. Different federal circuit appeals courts have issued contradictory rulings on those cases, so the industry has asked the Supreme Court to resolve those differences; the top court has not decided whether to take that case.
Donald Trump, of course, owns restaurants as part of his hospitality empire and stands to benefit from this rule change, as do many of his friends and campaign donors. But what the restaurant business might not fully appreciate is that their stealth attempt to gain control over tips could alienate and antagonize customers. Diners who are no longer certain that their tips will end up in the hands of the server they intended to reward might leave no tip whatsoever. Others might seek to covertly slip cash to their server. More high-minded restaurateurs would be tempted to follow the lead of the New York restaurateur Danny Meyer and get rid of tipping by raising prices and bumping up salaries.
By changing the fundamental underpinnings of tipping, the government might well end up destroying this practice. But in doing so it would hurt many working-class Americans, including people who believed that Trump would fight for them.