New Labor Department rule would let restaurants pay workers less

The Trump administration released a new proposed rule on Tuesday aimed at letting restaurant owners pay less to their workers under the guise of “flexibility.”

The Department of Labor — now under the control of newly confirmed Secretary Eugene Scalia — would allow restaurants to require their servers to “pool” tips and share them with “back-of-the-house employees,” like cooks and dishwashers.

The rule essentially allows restaurant owners to take the tip money customers give servers and bartenders to subsidize the rest of the staff. Owners are then transferring money earned from the front-of-house employees, who are paid as little as $2.13 hour, to subsidize back-of-house wages. Employers would still be required to pay back-of-house workers the minimum wage but would be able to avoid salary increases by the transfer of tip money instead.

NPR reported that the Labor Department estimates this could transfer over $213 million per year from front-of-house, or waitstaff employees, to people that work in the kitchen.

The executive summary basically admits that this is a windfall for restaurants:

However, because back-of-the-house workers may now be receiving tips, employers may offset this increase in total compensation by reducing the direct wage that they pay back-of-the-house workers (as long as they do not reduce their wage below the applicable minimum wage). This could allow employers to capture some of the transfer.

The National Restaurant Association, a powerful anti-worker industry trade group that has spent millions lobbying for this rule, has long been among the leading voices against livable wage laws for restaurant workers. In a statement to NPR, the group celebrated the new proposed rule as providing “regulatory clarity.”

“This rule establishes once and for all an appropriate balance, and ends arbitrary and capricious regulations,” claimed Angelo Amador, the organization’s regulatory counsel.

But the top Democrat on the Senate Health, Education, Labor, and Pensions Committee called the move a betrayal of a bipartisan Congressional compromise enacted in 2018.

“A matter of days into the job, President Trump’s Secretary of Labor Eugene Scalia is already proving exactly what I feared: that he’ll really serve as a Secretary of Corporate Interests,'” Sen. Patty Murray (D-WA) said in a press statement on Tuesday. “This proposed rule seems to betray the compromise language Congress put into law just last year—instead it has the clear goal of allowing employers to steal employees’ tips and to pay their workers less.”

Lily Roberts, director of economic mobility at the Center for American Progress, warned that people who work for tips “are disproportionately likely to be women or people of color” and said the group is “already subject to significant wage theft and harassment.”

“It’s clear that with this proposal that the Trump Administration is caving to the restaurant industry lobby, which has spent decades fighting against ways to fairly pay the workers who sustain their industry,” Roberts said.

The public has until December 9, 2019, to comment on the regulation before the Trump administration attempts to implement it.

The Raise the Wage Act, a bill to raise the hourly federal minimum wage for workers to $15, contains provisions that would phase out the sub-minimum wage for tipped workers entirely. It passed in the House in July but is one of hundreds of bills being blocked by self-described “Grim Reaper” Senate Majority Leader Mitch McConnell.

This article has been updated to describe the effect of the rule on front-of-house employees.

Published with permission of The American Independent Foundation.