Forget tips — just raise wages
When it comes to restaurant tipping, the Trump administration apparently thinks socialism is best.
The Labor Department has notified the Office of Management and Budget that it intends to rescind an Obama-era rule preventing restaurant owners from pooling servers’ tips with kitchen staff.
The rule specified that tips belong solely to the server. The Trump administration wants restaurant owners once again to be able to redistribute the wealth among non-tipped workers.
A Labor Department spokesman declined to elaborate on the agency’s OMB filing, which offers no explanation for the proposed change.
But it’s not hard to conclude the administration is responding to lobbying by the National Restaurant Assn., which favors pooled tips as a way to boost compensation for kitchen staff rather than paying cooks and dishwashers higher wages.
“You’d love to be able to pay everyone $30 an hour,” said Angelo Amador, regulatory counsel for the association and executive director of its affiliated Restaurant Law Center.
“But you need to be able to make a profit,” he told me. “If you can’t make a profit, you’re out of business and nobody has a job.”
Congress amended the Fair Labor Standards Act in 1974 to allow employers to pay tipped workers less than federal minimum wage
if the workers’ gratuities made up the difference.
In 2010, a federal court ruled that if an employer pays tipped workers at least the federal minimum wage of $7.25 an hour, it can require that gratuities be shared among the entire staff. In effect, this meant such tips belonged to restaurant owners, not servers.
In response, the Labor Department decided in 2011 that tips are the property of the employee, and that “the employer is prohibited from using an employee’s tips” to pool funds for kitchen staff.
“We think this is wrong,” Amador said. “The people in the back of the house are contributing to the meal just as much as the server.”
True. And that’s why I say — and have said before — that it’s time we joined most other developed nations in doing away with the archaic custom of tipping.
Instead, pay all workers a living wage.
Would restaurant prices rise by 20% or more to accommodate the lost gratuities? Probably. But prices would reflect the true cost of a meal, rather than masking costs with the pretense that customers are incentivizing and rewarding good service.
Some restaurants have attempted to eliminate tipping. I wrote last year about the experience of Joe’s Crab Shack, which got rid of tipping at 18 of its outlets nationwide. Within a year, almost every one of those restaurants had reintroduced the tip system — at customers’ request.
“What we know in practice is that tipping actually has little impact on service in most restaurants,” Lars Perner, an assistant professor of marketing at USC’s Marshall School of Business, said at the time. “But it gives consumers the feeling that they’re in control.”
The thing is, that sense of control is illusory. Researchers have found that most customers will tip regardless of service quality. Even crappy service will receive some reward.
As for tip pooling, such systems can be easily abused by unscrupulous restaurant owners who might cut themselves in for a piece of the action. The Obama administration sought to prevent this with its 2011 rule, which is now being litigated, possibly all the way to the U.S. Supreme Court.
The Trump administration would make that litigation moot by returning restaurant owners to the driver’s seat — as they’ve been seeking. (The National Restaurant Assn. spent $4.2 million on lobbying last year and $3.9 million so far this year, according to the Center for Responsive Politics.)
Better to place customers in charge by allowing them to favor businesses with their patronage, incentivizing restaurant owners to provide the best overall experience possible.
In most other parts of the world, good service is simply expected, not something that costs extra. It should be the same here.
Splitting the check
While we’re on the subject of tipping, here’s a cautionary tale to keep in mind.
Rancho Park resident Jay Friedman and his wife joined another couple recently for dinner at Havana Mania, a Cuban restaurant in Redondo Beach. The bill came to $89.65 and included suggested gratuities of 15% ($13.45), 18% ($16.14) and 20% ($17.93).
Friedman, 91, said he and the other couple split the check. When the bill for his half arrived, he saw that the suggested gratuities were unchanged, rather than also being cut in half.
“This isn’t a major crime,” Friedman told me. “But it’s outrageously deceptive.”
It should go without saying that when diners split a check, they’re also splitting the tip. In this case, Friedman calculated that 15% of his share should have been $6.73. A 20% tip should have been $8.97.
The restaurant’s owner, Luis Montesdeoca, told me the suggested gratuities are part of the software of his vendor’s card-processing system. He said most patrons have no problem figuring out how much to tip for split checks.
But Friedman said misunderstandings are likely.
“I suspect this is more widespread than most people realize,” he said.
I suspect he’s right. In fact, Calabasas Hills-based Cheesecake Factory is being sued in L.A. County Superior Court over just this issue.
The suit alleges that customers “were essentially duped … into paying double gratuity, and sometimes even more than double.”
Alethea Rowe, a spokeswoman for Cheesecake Factory, responded: “All gratuity amounts listed on our guest checks are suggestions only. Guests are free to tip as they please.”
Like I say, better all around if they didn’t have to.