Tuesday, March 27, 2018

Restaurants Cannot Keep Servers’ Tips, Per the New Budget Bill

Tucked away in the $1.3 trillion, 2,200 page spending bill last Friday were a few paragraphs that prohibited restaurants from requiring wait staff to share their tips with back-of-the restaurant workers like dishwashers, cooks, and bussers. The law makes it clear that tips belong to the person who received them, and no one else.

The spending bill enshrines into law a 2011 regulation passed by the Obama Administration which also prohibited restaurants from redistributing the tips of servers. This provision in the spending bill rebukes a rule proposed by the Department of Labor late last year that would have undone the Obama-era rule and permitted restaurants to redistribute servers’ tips.

The Fair Labor Standards Act requires employers to pay at least the federal minimum wage of $7.25 per hour. However, the law provides an exception for workers who receive tips, permitting employers to take a “tip credit” and pay them only $2.13 per hour. The new law applies to both employers who pay minimum wage and those who use this tip credit. This is different from the 2011 regulation, which was unclear on whether tip pooling was permitted for those employees who did not receive a tip credit.

Employers who take an employee’s tips and redistribute them to other staff could face fines of up to $1,100 each time that they do this. Therefore, we suggest that restaurants put tip pooling policies in place. Contact me for information on how to do this.