Trump's New Tip Pooling Rule Means Harsh Fines for Rule-Breakers

Trump's New Tip Pooling Rule Means Harsh Fines for Rule-Breakers

First, the back story:  The Fair Labor Standards Act (FLSA) sets the rules for paying minimum wage and overtime.  It allows employers to take a tip credit against its minimum wage obligations if certain conditions are met.  One of those conditions is that tipped employees must be allowed to retain all of their tips. There is one exception to this – that employers can require employees to participate in a valid tip pooling arrangement.  

There are various requirements for a tip pool to be valid but most importantly, the tips can only be shared with people who customarily and regularly receive tips. Typically, these jobs are in the front of the house.

The FLSA is silent as to whether these same restrictions apply to employers who don’t take a tip credit and instead just pay a full minimum wage.  In 2010, the Ninth Circuit ruled that they don’t apply if you don’t take the tip credit. In 2011, the DOL issued regulations saying that they apply whether you take the tip credit or not.

The Tip Pooling Loophole

In 2017, the Trump Administration proposed a rule that would clarify this issue.  

The rule sought to allow employers who pay a full minimum wage to include back of house workers in a tip pool.  But the rule as proposed left open a potential loophole – that in giving employers control over the tips (under the expectation that they would use them to pay back of house workers) that the rule would have also allowed employers to pocket the tips if they wanted to.  

This prompted an enormous uproar and ultimately the administration scaled back; the law would be revised to make clear that employers cannot under any circumstances keep any portion of their employees’ tips.

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6 Ways to Best Prepare Your Restaurant for Wage Increases

6 Ways to Best Prepare Your Restaurant for Wage Increases

If you haven’t done so already, preparing your restaurant for a regulated wage increase should be near the top of your to-do list, no matter your region. There has been plenty of government level discussions and a ‘movement’ if you will, defining a need to offer better living wages for citizens across North America (and abroad), with a focus on the hospitality industry.

The day is coming if it already hasn’t happened in your area.

Should your restaurant have already been offering what’s called a ‘living wage’? Arguably yes, but the market for years has demanded ‘good food for cheap’ (for the most part) which has dictated the need for restaurateurs to pay out a minimum wage to its hard-working staff.

However, the times are rapidly changing. And that’s not necessarily a bad thing.

Not surprisingly, however, many restaurateurs, potentially ones like yourself have become concerned about the complications a dramatically large increase in their costs will have on their operations.

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Will Your Business Be Impacted By The Minimum Wage Hike of 2018?

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As 2018 approaches closer and closer, there are a few new policy changes that may impact your business if you live in one of the following places: California, Colorado, District of Columbia, Hawaii, Maine, Maryland and New York City. One of the biggest ones, however, is the increase of minimum wage.

The policy change will be benefiting low-income workers in a push by some government officials to ensure its constituents are able to earn a sustainable living.

As reported by “The Motley Fool,” one of the biggest minimum wage hikes is tied the fast-food industry in New York City. The populous city is implementing the first part of the two-year initiative to help workers make $15 an hour by 2019. So, by Dec. 31, if a worker was making minimum wage ($12) he or she will be able to add an additional $1.50 per hour worked that day and for the rest of 2018. The goal is that by the last day of the following year the second part of the initiative (another $1.50 increase per hour) can be implemented, so the city meets its 2019 goal.

Maine is the next location with the highest minimum wage increase, up one whole dollar. The move is part of a four-part measure and by 2018 it will be in its second stage. It is expected to continue hiking up a dollar yearly until it reaches its goal of $12 per hour by the year 2020.

Colorado, like Maine, has a similar goal of $12 per hour as its minimum wage by sometime in 2020, but to get there it will increase by 0.90 cents. In 2018, the hike will be the first of three annual increases.

For more details about the minimum wage increases in Hawaii, Maryland, D.C. and California, read “The Motley Fool.”

Is Adding a Menu Surcharge Really a Solution to Minimum Wage Increases?

Is Adding a Menu Surcharge Really a Solution to Minimum Wage Increases?

By Brian Murphy, Foodable Industry Expert

The industry has been preparing for 2017, especially when it comes to the increases in minimum wage and the associated rising costs of doing business. Particularly healthcare and minimum wage — you know, the things that are supposed to increase the quality of life for our employees.

The quality of life issue is seen as a one-way street for many hospitality industry business owners, and steps have been taken to revise business plans in anticipation of the higher costs of doing business. Some have done nothing and continue to complain about the decreases in profits and how difficult the business already is, while others strategically adjust. Those adjustments run the gamut of management styles, from changing the style of the restaurant or increasing menu prices, to cutting hours or adding a surcharge as a form of protest.

But is adding a surcharge the way to go?

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Washington Report: 30 Days Post-Election, Restaurants React

Video Produced by Denise Toledo

This week marks one month since Donald Trump was voted as the next President of the United States. On this week’s "On Foodable Weekly: Washington Report," we discuss how restaurants are responding to the incoming administration, as well as what they can expect from some of the new legislation that passed. 

Since November 8, we have seen high-profile recount requests from opposing candidates, and controversial cabinet picks from the president-elect. We have also seen job-saving business deals, such as the agreement made between Trump and Carrier and the DOW has surged to new heights. We took to the streets of Washington, D.C., to talk to restaurant operators about their reaction to the election and what they expect in the coming years. 

Shaun Sharkey, Partner at Pow Pow: Greens, Bowl, and Rolls said, “Just the overall impression of their take on environmental issues.... We’re concerned that that’s going to affect a lot of our fresh produce and raise costs on food, or affect just the environment in general. I think that will affect a restaurant like ourselves, where we base a lot of our foods on organic products. It’s a very big deal to us.”

Aside from the presidential race, the fight for $15 hour-wage campaign had also been a major topic this election cycle. Five states voted on new minimum wage laws with four states passing those legislations, such as proposition 206 in Arizona. We spoke to David Wells, the research Director of the Grand Canyon Institute in Arizona which released a study outlining the effects of Proposition 206. 

“The fast food restaurants especially rely a lot more on lower-wage workers who are currently right near the minimum wage. And [of] those establishments, about 25 percent of their total costs are labor. We estimated that the ultimate effect by 2020 is that this might lead to restaurants needing to increase their prices by up to 6 percent on average for fast food,” Wells said. 

Keep up with the Washington Report for updates on policies affecting the restaurant industry.