Trump DOL’s Proposed New Rule to Allow Employers to Pocket and Redistribute Tips

December 7, 2017 | Scott R. Green | Johanna Sanchez | Employment & Labor

The Trump Administration’s Department of Labor has proposed a new tip rule that could rescind a 2011 regulation enacted during the Obama administration that mandates employers distribute tips to their tipped employees. The proposed rule, which was published in the Federal Register on December 5, 2017, would allow restaurant owners to pool tips and share them with untipped employees so long as all of the employees are earning at least the federal minimum wage.

Under the current regulation, it is illegal for employers to keep any of its employees’ tips, and tip pools are allowed as long as the pool only includes “front of the house” employees, or employees who normally receive tips. The proposed rule would allow for employers to expand the tip pool to include “back of the house” employees, like dishwashers, cooks and barbacks.

The Department of Labor heralds the new rule as an effort to reward the back of the house employees whose contributions to the customer’s overall experience, they claim, are currently being overlooked. Proponents also contend that the new rule will help decrease the wage disparity among the two groups of employers. However, opponents, while sensitive to this disparity, cannot overcome the fact that under the new rule, employers are allowed to keep tips for themselves. As Heidi Shierholz, a senior economist and director of policy at the Economic Policy Institute, notes, “it seems obvious that when employers can legally pocket the tips earned by their employees, many will do so.”

The proposed change is open for public comment until January 4, 2018 (30-day commentary period) and this is also sounding alarms for many. While commentary periods generally range from 30-60 days, government agencies may allot as much as 180 days for commentary. Many argue the period is too short for a true analysis of how the proposed changes will impact workers.

All employers in tipping industries should monitor this situation closely. Employers should also be mindful to stay in compliance with all state and local tipping regulations that differ from or exceed federal standards.

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