State lawmakers, workers oppose federal tip-pooling proposal
The U.S. Department of Labor is in the process of reviewing more than 380,000 comments it received regarding a controversial rule proposal that would allow for sharing of tips among tipped and non-tipped workers.
The Department of Labor argues that this will help restaurant cooks and dish washers, who may receive less than tipped workers, but critics point out that nothing in the rule prohibits employers from just pocketing tips.
The proposed change only applies where employers pay a direct cash wage of at least the minimum wage and don't take a tip credit. A tip credit allows employers to meet their minimum wage obligations in part through tips.
The proposal would have minimal impact on Connecticut — unless the state were to do away with its tip credit. Currently, with the tip credit, restaurants are required to pay $8.23 to bartenders and $6.38 to other tipped service employees. If an employee doesn't get enough tips to reach the state minimum wage of $10.10 an hour, the employer has to make up the difference.
Dan Meiser, chairman of the board of the Connecticut Restaurant Association, said he is not aware of any Connecticut restaurants that pay servers $10.10 and don't take a tip credit.
The Economic Policy Institute, a left-leaning think tank, said in practice, "employers who want control over employees' tips will pay the full minimum wage under the new rule, even if they are currently using a tip credit." EPI estimates the new rule would lead employers to pocket $5.8 billion in tips nationwide, with $96.2 million in Connecticut.
Meiser said he shudders "at the fact of that $96 million number ending up in any serious kind of conversation," saying it's worst-case-scenario thinking and that restaurant owners would lose their staff if they opted to pocket tips.
Hundreds of state residents have added their comments — which are overwhelmingly negative — on the proposal on regulations.gov, and state and federal officials have signed on to letters expressing their opposition.
A Department of Labor spokesperson said each comment needs to be evaluated and that will take a while, so there is no estimated date for when a decision will be made on the rule.
Connecticut elected officials oppose change
Connecticut Attorney General George Jepsen was one of 17 attorneys general to sign a Feb. 5 letter to Labor Secretary Alexander Acosta opposing the rule change.
They believe the change "would be inconsistent with the long-established cultural and legal understanding of tips as the property of the employees who earn them," and that it "would create the real potential for customers to be deceived as to (who) will receive and benefit from their tips."
U.S. Rep. Joe Courtney, D-2nd District, was one of 124 members of Congress to sign a Feb. 5 letter to Acosta opposing the rule change.
One concern expressed was that "employers could opt to reduce non-tipped workers' base pay and redirect tips taken from tipped workers to keep non-tipped workers at their existing pay levels, harming tipped workers and leaving non-tipped workers no better off."
The rule change proposal suggests that employers could allocate tips to make capital improvements, lower menu prices, provide workers with paid time off or hire additional workers.
Sens. Richard Blumenthal and Chris Murphy were two of 24 U.S. senators to sign a Feb. 6 letter expressing concern that the rule would result in employees losing billions of dollars in tips.
Many Connecticut residents who submitted comments on regulations.gov used the same template, saying the rule would "go against decades of federal and state law and precedent, which has safeguarded tips as the property of the workers who receive them. If adopted, this regulation would force a vulnerable workforce further into poverty, economic instability, and vulnerability to harassment and assault."
Karen Devirgilio, a Groton Townhouse waitress, wrote that she has been in the food service industry for 40 years and implored the Department of Labor not to take tips away from servers who work hard for their money.
In a follow-up call with The Day, she said that having worked in several diners, she hasn't made the kind of money that servers in high-end restaurants do.
"My income varies with whether it's Navy pay day, or what's going on in the area," Devirgilio said. She added, "You've got kids out there that don't know how to tip, or haven't been taught how to tip or just don't want to tip, so we're not making all this money that they think we're making."
What about the tip credit?
The state Labor and Public Employees Committee last session introduced a bill that would eliminate the tip credit, but it never made it out of committee. The Connecticut Restaurant Association submitted testimony opposing this bill.
Restaurants operate on "historically very thin margins," said Meiser, who owns Oyster Club, Engine Room and Grass & Bone in Mystic. He has 151 employees across his three restaurants, and he said servers can make close to $30 an hour with tips.
Meiser said the tip credit frees up money for him to give a raise to a young line cook who might be making $15 or $16 an hour.
He said that in states where the tip credit has been eliminated, restaurants are eliminating tipping, or adding a 15 or 20 percent surcharge instead — which goes to the business, not the server.
In the fall of 2016, Maine voters passed a referendum requiring restaurants to pay a direct cash wage of at least the state minimum wage, thus doing away with the tip credit.
But in June, the Maine House voted 110-37 to restore the tip credit. The Portland Press Herald reported that restaurant owners and workers said the change would increase labor costs while diminishing tips for servers.
A brief history of tip regulations
In 1966, Congress created a provision allowing an employer to cover up to 50 percent of minimum wage obligations with tips.
A 1974 amendment allowed employers to implement a tip pool, but only among workers who "customarily and regularly receive tips."
In 2011, the Department of Labor implemented regulations prohibiting employers from sharing tips with employees who don't usually receive tips, regardless of whether the employer takes a tip credit. Since then, there has been much litigation involving the practices of businesses that pay a direct cash wage that is at least the federal minimum wage — $7.25 — and don't take a tip credit.
In 2016, the Ninth Circuit Court of Appeals found that the regulations were a reasonable way to fill gaps left in the Fair Labor Standards Act of 1938. The National Restaurant Association's petition for the Supreme Court to review the Ninth Circuit decision is pending.
Historically, six states have prohibited employers from using tips as a credit against the state minimum wage: Alaska, California, Montana, Nevada, Oregon and Washington.
According to the Department of Labor, the share of tipped employees working for an employer that must pay a direct cash wage of at least the federal minimum wage has increased from 17 percent in 2011 to 31 percent today.
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