The federal government is changing the rules on how tipped workers are paid, in a move that worker advocates say will cost $ 700 million annually from the pockets of servers, bartenders, bellboys, and other service workers.
The labor department enacted a rule late Tuesday that would allow employers to require tipped employees, such as waiters or bartenders, to share their tips with un-tipped employees, such as cooks and dishwashers.
The rule also removed a previous requirement regarding how much time tipped employees might be required to spend on untipped work. Previously, the government limited the amount of time a tipped employee could spend on untipped activities to 20% of his shift. By lifting that limit, employers could drastically underpay their employees, said Heidi Shierholz, policy director at the left-wing Economic Policy Institute who worked at the Department of Labor under President Obama.
“It allows employers to have employees spend more time on non-tipping work while still receiving a sub-minimum wage,” said Shierholz.
For employees who rely primarily on customer tips, untipped work is part of it. Servers and bartenders often help set up a restaurant before opening, or help clean up after the establishment closes and customers leave. The new rule allows employers to transfer much more of this untimed work to their lowest-paid workers, the EPI said.
For example, instead of employing three dishwashers, a restaurant could decide to rent only one dishwasher and require all waiters to wash dishes regularly as part of their shift, the EPI said. This would be a big savings for the restaurant, which is required to pay dishwashers a minimum wage of $ 7.25, but can tip servers only $ 2.13 in some states.
Over the course of a year, tipped workers would lose more than $ 700 million under this new rule, the EPI estimated last fall. That number has likely increased since the coronavirus pandemic, Shierholz noted. Now that in-house dining has been drastically reduced, many restaurants that have managed to stay open have switched to mostly no-tipping work, such as prepare pick-up orders.
Share and share the same
The tip-sharing requirement of the DOL could transfer $ 109 million from tipped employees to their counterparts, according to the department’s analysis. In a press release, wage and hour manager Cheryl Stanton said the new rule could potentially increase the income of back-of-house workers and also “ reduce the pay differentials ” between customer-facing workers who receive tips and those who don’t.
In many restaurants, front-of-house employees have traditionally earned more than their back-of-house counterparts. Nationally, restaurant work remains one of the lowest-paid jobs. According to the Bureau of Labor Statistics, waiters and waitresses make an average of just $ 26,600 a year, while dishwashers make $ 24,400 and cooks $ 27,550.
“You don’t solve the low wages of the lowest-paid workers by taking it out of the wages of the second-lowest-paid workers. You pay them more,” said EPI’s Shierholz.