Employers may be able to keep workers’ tips under proposed labor rule

Updated Feb 12, 2018
money

The five Democrats in the state’s congressional delegation are irate about a proposed Department of Labor rule that they say could allow employers to steal employees’ tips.

The outcry centers on the Trump Administration’s December 2017 decision to undo a 2011 rule that codified the idea that workers’ tips were their own.

The Trump Administration says the rules — aimed at restaurants that pay minimum wage — aren’t designed to allow managers to pocket their employees’ tips; but instead are aimed at allowing — but not requiring — “back–of–house” such as cooks or those who bus tables, to also receive a fair share of tips.

RELATED: Senate protests tip rule, says it’s ‘stealing’

“Both front–of–house and back–of–house employees contribute to the overall customer experience — yet the current rule bars sharing any tips with back-of-house employees in establishments that pay the minimum wage, contributing to wage disparities among employees,” said a Department of Labor spokesperson.

The Labor spokesperson disputed the notion that the rule will result in employers pocketing employee tips.

“Employers who keep their employees’ tips will be unlikely to retain the employees they need to serve customers,” the spokesperson said. “Moreover, taking tips inherently undermines the incentive system that rewards employees for performing excellent customer service, as well as the incentive to maximize the number of customers served… The idea that this proposal is about employers keeping tips defies common sense.”

But that explanation has not satisfied Democrats, who say it could result in employers pocketing billions of dollars from workers. A study by the left-leaning Economic Policy Institute found that the rule would cost tipped U.S. workers $5.8 billion a year, including $224 million for tipped workers in Ohio. That study found that an estimated 16.1 percent of all tips would be pocketed by employer. Tipped workers nationally earn a total of $36.4 billion annually.

Ohio currently can pay workers $4.15 an hour if they earn tips, but employees are permitted to keep all of the tips they earn. According to Policy Matters Ohio, employers are required to pay non-tipped workers at least $8.30 an hour - the Ohio minimum wage. Under Ohio’s law, employers are required to provide tipped workers with $8.30 an hour if they do not get enough in tips to make the minimum wage.

Michael Shields, a researcher for the left-leaning Policy Matters Ohio, said while it’s possible employers may share some tips with back–of–house employees, it’d be likely they’d use those tips to offset wages rather than increase them. That’s because there simply isn’t enough demand for back–of–house workers to require such workers be paid more, he said.

He said the proposal contains no requirement that business owners who confiscate tips distribute them among workers at all, they say.

“They call it the ‘tip–sharing rule,’ but we’re calling it a ‘tip–theft rule,’ because it allows employers to seize employees’ tips,” he said.

On Thursday, Sen. Sherrod Brown signed onto a letter to Secretary of Labor Alexander Acosta, that criticized the rule, saying it “would take money out of the pockets of low-wage workers.”

They cited news reports that Labor disregarded studies showing up the impact on workers, saying that Labor “covered up” reports indicating how the rule would hurt workers. The letter was signed by 22 other Democrats and Sen. Bernie Sanders, I-Vermont.

Separately, Ohio’s four Democratic House members — Reps. Joyce Beatty of Jefferson Township, Marcy Kaptur of Toledo, Tim Ryan of Niles and Marcia Fudge of Cleveland — issued a joint statement saying they were “extremely concerned” about reports that the Department hid studies critical of the rule.

“The way the rule is currently worded does nothing to protect the hard-earned pay from workers across Ohio and our Nation, in fact, it takes us backward,” they said. “The U.S. government, especially the Department of Labor, should stand on the side of our workers, not help greedy companies reach into their pockets for their hard-earned wages. We urge this Administration to scrap this rule and go back to the drawing board.”