A provision in the spending bill that passed the House Thursday would rewrite the law on giving tips to workers by making it illegal for employers to take them, undermining an effort by the Labor Department to allow business owners to redistribute the tips among their staff.
The Trump administration’s move has been highly controversial, with Democrats arguing the proposed change would allow business owners to keep the tips for themselves. The liberal Economic Policy Institute said $5.8 billion in tips could be taken under the administration’s proposal.
The omnibus bill would prevent that by updating the Fair Labor Standards Act to say: “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.’’ Violating the law would subject employers to penalties of up to $1,100 for each violation in addition to paying back the tips.
Critics cheered the addition of the language in the must-pass budget bill. “The law cannot be more clear: Tips belong to workers and no one else. This landmark victory belongs to all the restaurant servers, bartenders, car wash workers, valets, attendants, and all the other tipped workers in America who fought back when the Trump administration proposed its misguided tip-stealing rule,” said Christine Owens, executive director of the National Employment Law Project.
A 2011 rulemaking by Obama-era Labor Department said tips are legally the property of the person who receives them. The restaurant industry has fought the rule, saying it creates an imbalance between the “front of the house” workers such as servers and bartenders and “back of the house” ones, like cooks and dishwashers, creating friction and making it difficult for owners and managers to fill non-tipped positions.
Last year, the Labor Department started the process to rewrite the rule, proposing to allow employers in all states to take the tips, provided they pay the relevant local minimum wage. That, the department said, “will allow for employers to provide in their agreements with employees for tip sharing among a larger tip pool of employees.”
The language in the omnibus bill would render the department’s effort moot by rewriting the underlying law to prohibit that move.
A restaurant industry source who requested anonymity said the intention was to allow for a more equitable distribution of money among workers and said that the 2011 rule, by making tips the property of the person who receives them, was an obstacle to that. The new language would make it easier for employees to establish tip pools among themselves, the source argued. Employee-created tip-pooling is legal.
“We are also pleased that the illegal 2011 rule enacted by the previous administration is being eliminated by this legislation, but our concern is the enforcement and penalty language for unintentional violations goes too far,” said Angelo Amador, executive director of the Restaurant Law Center, the legal arm of National Restaurant Association.
