Labor rule allows restaurants to require broader tip pooling

A final Labor Department rule released Tuesday will allow restaurants to require servers to pool their tips with staff who traditionally do not receive tips, and softens restrictions on non-tipped work for employees who earn a lower, tipped minimum wage.

The rule will only allow required tip pooling for restaurants that pay a full minimum wage, however, and bars managers and owners from partaking in the tip pooling, part of a 2018 compromise between Sen. Patty Murray (D-Wash) and then-Labor Secretary Alexander Acosta.

“This final rule provides clarity and flexibility for employers and could increase pay for back-of-the house workers, like cooks and dishwashers, who have been excluded from participating in tip pools in the past,” said Cheryl Stanton, the Labor Departments’s wage and hour administrator.

“Newly allowed tip sharing may incentivize the inclusion of these previously excluded workers and reduce wage disparities among all workers who contribute to customers’ experience.”

But critics say the rule could allow restaurants and bars to skimp on wages for non-tipped staff such as cooks and dishwashers, covering those wages with pooled tip money from servers instead.

They also say that a change of the so-called 80/20 rule could be bad for tipped workers.

Employers are allowed to pay tipped workers a “tipped minimum wage” of $2.13 an hour, provided that tips bring the total haul above the federal minimum wage of $7.25 an hour.

Previously, tipped workers such as servers could spend up to 20 percent of their time doing non-tipped work, such as rolling silverware into napkins, without having to receive a full minimum wage.

The updated regulation eliminates the clear demarcation of 20 percent, saying instead that they may only be required to spend a “reasonable time” on such duties, immediately before or after their tipped work.

“‘Reasonable time’ is not defined, and its ambiguity will make it difficult to enforce, providing employers an immense loophole and leaving workers behind,” said Heidi Shierholz, a scholar at the Economic Policy Institute and former chief economist at the Labor Department under President Obama.

Shierholz estimated that this could cost tipped workers a collective $700 million a year, and shift more jobs from non-tipped to tipped.