Servers feeling burned by plan to take their tips
On a good shift, Jim Conway earns as much as $25 an hour in tips bringing Italian dishes to hungry customers who are happy with the food and his service. That supplements a $2.83 hourly wage Mr. Conway is paid by his employer, Olive Garden in Monroeville, where he has been working for 14 years.
A proposal released this month by the Trump administration aims to allow the restaurant to take most of those tips out of his hands at the end of the night.
In the latest reversal of an Obama-era labor policy, the U.S. Department of Labor wants to legalize tip-pooling again. The practice allows employers to take tips held by a server and distribute them to non-tipped workers.
The move stokes a long-running and complicated debate: Who owns tips, a source of roughly $36 billion in revenue nationally each year?
The Labor Department’s argument, supported by business groups like the Pennsylvania Restaurant & Lodging Association, is that tips create an earnings gap among workers. The extra money that customers give to “front of house” positions — servers — boosts total earnings far above those of “back of house” positions, like cooks, bussers and dishwashers.
“Workplaces would have the freedom to allow sharing of tips among more employees ,” the federal agency stated in a press release.
By sharing tips, restaurant owners are more adequately compensating the fact that a customer’s generosity is based not just on service but on a clean table and well-cooked food, said Melissa Bova, vice president of government affairs for the state restaurant association.
“You have servers in this industry that are making $20 to $25 an hour, while dishwashers and cooks make $13, $14, $15 an hour,” Ms. Bova said.
Labor advocates call the proposed rule an attempt to undercut the advancement of workers in a low-wage industry.
Employers are “trying to hide the fact that it’s a huge windfall to restaurant owners,” said Heidi Shierholz, senior economist and director of policy for the Economic Policy Institute, a left-leaning think tank based in Washington, D.C.
Ms. Shierholz, who served as chief economist for the Labor Department during the Obama administration, pointed to previous studies that have shown employers frequently pocket tips illegally.
“It opens up a new avenue for wage theft,” she said. This month, she estimated the proposed rule would allow employers to pocket $5.8 billion in tips — about 16 percent of all those earned by tipped workers in 2016, according to her analysis of reported tips on tax returns.
The labor economist acknowledged there could be a labor rights pitch to closing disparities between servers and cooks. “My solution to that would not be to take from workers who are one notch up and share with lower workers” but instead put the burden on employers to raise wages and improve benefits, she said.
The debate over tips is not new in the restaurant world.
Federal labor law allows employers to pay tipped workers as low as $2.13 per hour, so long as those workers make at least the federal minimum wage of $7.25 an hour.
After the Obama administration prohibited employers from pooling tips in 2011, business groups sued the government, claiming that employers have a right to take and distribute a worker’s tips above the minimum wage. This year, the National Restaurant Association and other groups petitioned the U.S. Supreme Court to hear the case. The high court could hear the challenge next year.
The Trump administration’s rule, which is going through a 60-day public comment period ending Feb. 5, in its current form allows employers to take the tips but stops short on instructing them to dole the money out.
The agency describes several ways employers would be allowed to use pooled tips including capital improvements to restaurants, lowering menu prices, paying for paid sick leave or hiring additional workers.
Employers have insisted they have no intention of keeping any tips for the establishment.
“Tips are the property of the employees,” said Ms. Bova, of the state restaurant association. “We do not support managers receiving tips or owners receiving tips. ... We have asked the Labor Department to clarify that in their final rule.”
Even if the rule is approved, some Pittsburgh restaurant owners said they would be hesitant to change their policies.
While newer restaurants might be able to pull off the change, more established restaurants could see their workers leave over lost earnings, said Kevin Joyce, owner of The Carlton in Downtown Pittsburgh.
“It would mean a flight of well-established career servers to other restaurants that did not employ this option,” said Mr. Joyce. The restaurant, in the BNY Mellon Center, has been in business for more than 30 years.
“As a guy that has many servers that have worked here 25-plus years and are well known to our guests, it would be a terrible decision,” Mr. Joyce said. “The extra $4.42 per hour [workers would earn receiving the minimum wage] would not come close to making up for the lost gratuities.”
At Church Brew Works, which has occupied Liberty Avenue in Law- rence ville for more than 20 years, management has no plans to pool tips, said owner Sean Casey.
The restaurant adjusts for any earnings disparities by paying kitchen staff higher wages and scheduling them to work more total hours, while servers, who earn more overall with tips, tend to work shorter shifts.
“If it ain’t broke, don’t fix it,” Mr. Casey wrote in an email.
Meanwhile, groups like Restaurant Opportunities Centers United, a nonprofit representing workers in disputes with management, have made some inroads in Pittsburgh and other cities in pressing restaurants to eliminate tips altogether and pay what the group call “one fair wage” — ideally, higher than the minimum wage.
“It opens up a new avenue for wage theft.” — Heidi Shierholz, Economic Policy Institute