Waiters, Bartenders Worry That Proposed Rule To Pool Tips Will Hit Pay

A Labor Department proposal to let businesses pool tips at restaurants and bars is meant to help “back of the house” workers like cooks and dishwashers, but bartenders and waitresses worry that it will mean a severe hit to their main source of income instead. (Photo by Lennart Tange/Creative Commons)

By Philip Athey

WASHINGTON – The tips Jonathan Teslevich earns are “crucial to my life,” which is why the Phoenix bartender worries that a new Labor Department rule on tip pooling could cost him the majority of his income.

The proposed rule change would reverse decades of departmental policy by letting employers pool tips received by any workers who are paid the federal minimum wage of $7.25 an hour.

The goal is to help pay “back of the house” workers, such as cooks and dishwashers, but it does not require employers to share tips once they collect them.

“This system would remove nearly 81 percent of my earnings from my control … earnings I poured effort and professionalism into,” Teslevich, a bartender at Zinc Brasserie in Phoenix Sky Harbor International Airport, said in an email.

An Economic Policy Institute report estimated that the change, in enacted, could cost tipped workers nationwide from $520 million to as much as $13.2 billion. Arizona would take the fourth-biggest hit,according to the report, with workers there losing $28.8 million to $703.6 million a year.

But supporters say the change will give restaurant owners a greater ability to compensate less-visible workers who also contribute to the customer experience.

“It’s definitely going to create more flexibility to businesses” to pay those unseen workers, said Dan Bogert, chief operating officer of the Arizona Restaurant Association.

Heidi Shierholz thinks the pooled money is more likely to end up in the pockets of the owners than with any cooks.

“You can apply very basic economic logic to reveal what they will do with the money,” said Shierholz, senior economist and director of policy at the Economic Policy Institute.

She said there is “no reason to believe back-of-the-house workers will see their pay go up,” because restaurants are already paying those workers what they have to from a profit-maximization point of view.

When it proposed the change in December, the Labor Department said it would give employers “the freedom to allow sharing of tips among more employees” and “help decrease wage disparities between tipped and non-tipped workers.”

The change would reverse a 2011 Obama administration rule that codified a department interpretation of tip-wage regulations in effect since 1966. It said tips were the property of the person who received them and that the only people who could be included in any pool were employees who regularly earned more than $30 in tips a month.

The proposal drew more than 375,000 comments before the public comment period closed last month.

“There is no ambiguity on this point … the rule would give employers full control over tips (as long as they pay the full minimum wage),” Shierholz said in an email. “They could do whatever they want with them.”

For Teslevich, it’s a matter of trust between front-of-house and back-of-house workers, and between employees and management.

“How is the tip amount divided, who decides?” he asked. “If this were to occur, then there would be massive conflict in the workplace.”

Since 2016, Teslevich said, there hasn’t been any money left in his paycheck after taxes and benefits are deducted.

“All my hourly wage pays my Medicare, Social Security and a portion of my state and federal income tax,” he said. “Tips pay my mortgage, my car loan, my bills.”

He’s not alone, said Rachel Sulkes, an organizer for UNITE HERE Local 631, a union that represents hospitality workers.

“These tips are the only way for these tipped employees to make the bulk of their income,” she said.

But Bogert downplayed the impact of the change, noting that only a fraction of all restaurants will be able to use it. To take advantage of the new rule, he said, businesses have to opt out of what’s called the tip credit, which lets restaurants pay less than minimum wage because worker incomes are supplemented by tips.

The period for public comment ended early last month and a final decision on the rule is expected this spring. In the meantime, workers like Teslevich wait to see what will happen with the “tips that lay the foundation of my and my family’s life.”

Shierholz said servers should be leery of letting restaurant owners have more power over their tips.

“They wanted to get their hands on that (money) for a long time,” she said, “and they finally have an administration that will give it to them.”

13 Comments on "Waiters, Bartenders Worry That Proposed Rule To Pool Tips Will Hit Pay"

  1. It is called socialism kids, hope you like it.

  2. being a dishwasher – salad and beans guy – of old during some stints in my college days – the front of the house ‘never’ failed to share some of their take with me – they didn’t have to – but good service and performance made them look good – allowed for more customers to come in – increasing the take and it’s just restaurant unspoken etiquette to take care of the back – they always did. Thank you! Now the government has to be involved in this? WHY?

  3. let me now moderate the bean’s and salad before it is spoken of… care for some salt with that?

  4. Let me see if I got this right. Some liberal Bureaucrat decided that a $15 an hour minimum wage would be a good living wage for everyone. The politico’s said hell yes and presto, we have the wait staff and “back” of the house making more. Just talked to a waitress at lunch the other day about this mess and she told me that she will loose about 6K dollars this year because of reduced staffing (reduction of hours) that came with increased minimum wage. Now a bureaucrat in the DOL is telling the wait staff they must pool their tips (most already give some of their tips) to help the “back” of the house that is already making minimum wage plus part of the wait staff tips. Seems about right to me. A career bureaucrat telling others how to spend their money, how they have to “share” their income with others. Welcome to the new world guys where the government sets all the rules and all wages are equal and productivity is frowned on because we are all the same. See any issues here? If the Millennials are starting to get it something has gone totally wrong. And the Bureaucrats will keep their jobs and get a pension for being dumb when they retire.
    Socialism at its finest brought to you by the DOL.

  5. When I get mediocre service I tip the minimum, when I get good/excellent service I tip to make my server’s day! If this socialist program goes live I guess I will continue my tipping habit, only I will slip the cash directly to the server with a wink and a smile.

  6. Heather Dale | March 10, 2018 at 9:25 am |

    Rather than working a minimum wage job and depending on tips, how about getting a well paying job?

    • Heather – will you bring me another beer – with an attitude ; oh and I’d like some more Rancho for the fries please… jobs Americans hoped to do.. now maybe not so much, hope your work ready my dear…

    • Heather you don’t have a clue how much a good server earns do you? Perhaps is you did you wouldn’t post a snarky comment like this. BTW, a friend of mine that was a bartender had to take a PAY CUT to take his lifelong dream job and that was a position with the Phoenix Fire Department. He now works part time to supplement his income from the City of Phoenix. Not all servers are poor and dumb as you believe them to be… might want to think next time.

  7. NOT a SOCIALIST | March 10, 2018 at 11:51 am |

    yet more of the give away what a respectful, conscientious worker makes and give it to the one who is lazy and doesn’t give a damn. yep! The 2nd part of the result is the lazy one will actually EXPECT more. yet another BAD decision from the labor board. I’ll suggest managers and owners start paying attention to who is doing a good job and reward it with better wages instead. This new rule takes away all competitiveness and drive to actually learn something and have some pride and confidence in the self. i.e. EGO. IT also teaches the disrespectful and lazy ones to be even more disrespectful and lazy. I hope Mr. Obama is proud! He is part of the idiots promoting this way of thinking.

  8. Albert Lannon | March 10, 2018 at 12:10 pm |

    Wait, wait — Obama?? I thought Mr. Trump was President and it is his Labor Dept. proposing the rule. So Trump’s a Socialist? Wow, who knew?

    • Albert, the ‘deep state’ are those ‘left’ over from the left.. they are the deep state ‘leaking’ in some instances still leading, as in schools etc. they are those that want this government to fail. Those that comprise the bottom of the swamp.. watch your fingers, they bite. Who’s the socialists… do you really have to ask, of course not.

  9. Who needs to party with Bernie when we have the DOL

  10. ““help decrease wage disparities” is a euphemism for socialism. Wage disparity is a euphemism for capitalism. Socialism is a euphemism for starvation, from Jamestown to the Soviet Union to North Korea. The secret to the economic success of China: capitalism.

Comments are closed.