"Tip Stealing" Rule Proposed Would Take $5.8 Billion From Restaurant Workers

The Department of Labor (DOL) has proposed controversial legislation that would be detrimental to tipped restaurant workers, but would put more money into the pockets of the operators and owners. 

The rule would make it legal for business owners to collect restaurant workers tips as long as they are paying them at least the minimum wage. 

"We estimate that if the rule is finalized, every year workers will lose $5.8 billion in tips, as tips are shifted from workers to employers. Of the $5.8 billion, nearly 80 percent—$4.6 billion—would be taken from women who are working in tipped jobs," writes the "Economic Policy Institute" (EPI.)

The EPI broke the $5.8 million down by gender and race too--

  • Non-hispanics tipped employees would lose $3.5 billion
  • Black non-Hispanic would lose $480.2 million
  • Hispanic workers would lose $1.4 billion
  • Asian workers would lose $382.5 million.

Proponents of the rule argue that the tips could than be distributed to kitchen workers. 

The discrepancy between tipped workers and non-tipped workers in the kitchen is a big issue in the industry. However, the rule does not require owners to collect the tips and share them among the whole staff. Evidently, it would likely lead to owners collecting and keeping the tips. 

According to the EPI, some employees are already pocketing tips. 

"Many employers pocket tips even now, when it is illegal for them to do so (for example, research on workers in Chicago, Los Angeles, and New York found that 12 percent of tipped workers had tips stolen from them by their employer or supervisor). The fact that illegal tip theft is so prevalent underscores that when employers can legally pocket tips, many will," writes the EPI.

Apparently, the DOL is supposed to provide an estimate of the amount of tips that will be impacted by the rule, but has yet to do so. 

So far, the rule is in the proposal stage. Anyone can submit a comment on the rule here before February, when the comment period comes to a close. The comments will be read by the department before it preps its final rule. 

We want to also hear from our readers! 

Is this rule needed to help alleviate operators' increasing labor costs that are cutting into their already low profit margins? Or is this only going to detour tipped workers from staying in the industry if they can't keep their tips? 

Read more from the Economic Policy Institute.