Plan allows restaurants to divvy tips

TIM CARMAN

● end the Labor Department’s practice of treating gratuities as the property of workers, a custom that dates to the 1974 amendments to the Fair Labor Standards Act.

The Labor Department officially published the proposed regulations Tuesday in the Federal Register, and the public has 30 days to comment on them. The rules would roll back some 2011 regulations from President Barack Obama’s tenure that had expressly prohibited employers from splitting server tips with traditionally nontipped employees, such as cooks and dishwashers. Back then, the agency was concerned server tips could, among other things, be used to pay the hourly wages of back-of-the-house employees.

The Obama regulations instigated a number of federal lawsuits, including ones from National Restaurant Association and other regional hospitality trade groups. The groups argued the Labor Department had overstepped its authority with the 2011 regulations, which were issued more than a year after the U.S. Court of Appeals for the 9th Circuit ruled that employers could split server tips with traditionally nontipped employees, but only if the businesses directly paid workers at least the full minimum wage and did not claim a federal tip credit. A tip credit is the portion of tips that employers are allowed to use to cover a worker’s minimum wage.

Before the 2011 rule change, some in the restaurant industry questioned whether all employers were required to follow the Fair Labor Standards Act’s rules on tipped employees. Some assumed that only restaurants that took advantage of the tip credit would have to heed the rules. Among other things, those rules require employees to retain all of their tips or take part in a tip-sharing pool that includes only “employees who customarily and regularly receive tips.”

Federal courts — sometimes the same one — have issued conflicting rulings on whether some businesses don’t have to follow the act’s rules for tipped employees. Last year, the U.S. Court of Appeals for the 9th Circuit sided with the Labor Department and its 2011 regulations, reversing its own ruling from 2010.

To muddy the waters more, the ruling by the U.S. Court of Appeals for the 10th Circuit earlier this year held that some employers could rightfully claim servers’ tips and use them as they want. The clashing legal decisions could compel the Supreme Court to take up the National Restaurant Association’s case this term and clear up the confusion.

In the meantime, the proposal by President Donald Trump’s administration seeks to remove some of the Obamaera prohibitions on tip-sharing. A Labor Department spokesman, speaking on the condition of anonymity, did not challenge criticisms that the rules would transfer control of tips from employees to employers. “This proposal would give workplaces the freedom to share tips among more employees,” he said.

While the proposal sounds promising in principle — a way to balance inequities between, say, fine-dining servers and bartenders earning nearly six figures a year and their colleagues in the kitchen earning $13 an hour — critics say the new rules could invite trouble. The rules, they say, would allow employers to distribute the pooled tips to anyone, including salaried managers or even themselves. (Some restaurants have opted out of the messy tipping system altogether; instead, they add a service charge to checks to pay employees equally.)

In recent years, high-profile chefs and restaurateurs have been sued for alleged wage theft, including Mario Batali, Daniel Boulud and Jessica Biel.