The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

New proposal could deliver “devastating” blow to tipped workers

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Being a tipped worker poses a number of challenges, and even some dangers. But one slight upside is that if you know how to play the game and hustle, you can take home pay above the minimum /poverty wage of $7.25 an hour. However, if the restaurant industry has its way, even that meager advantage would be gone.

BREAKING: As this blog was being written, it was revealed that the DOL deliberately shelved an economic analysis that revealed the true impact of this proposal. EPI notes: “DOL should release its analysis immediately or, better yet, withdraw its proposal and refocus on its mission of serving working people, not big business.” Submit comments on this page, or text TIP to 225-568.


 

There’s currently a rule on the books that prevents employers from taking away tips from workers. That’s it. All it means is: you work hard at a difficult job, handling problematic customers and sexual harassment and long hours, and you get to keep the reward for good “service.” Countless people have opted for tipped jobs knowing that it’s one way to earn a little more than the poverty wages mandated by federal law ($7.25 an hour/ $290 a week/ $15,000 a year).

However, it’s a new day in Washington, and there’s a new move to roll back that rule. The Department of Labor (DOL) is entertaining a proposal to allow employers to confiscate and hold onto tips. If you want to know why, just look at the force behind this proposal.

Yes, it’s the restaurant industry. They’d like to make sure they have the chance to pocket the tips left by customers (without their knowledge). The way they see it, as long as they pay the minimum wage –– those tips belong to the employer.

Reversing this rule would deliver a shattering blow to millions of workers – most of them (80 percent) women, disproportionately people of color. Our friends at the National Employment Law Project (NELP) and the Restaurant Opportunity Center (ROC) have concluded that restaurant servers and bartenders rely on tips for more than half of their earnings. The Economic Policy Institute (EPI) estimates workers would lose $5.8 billion; women would lose $4.6 billion (more than $1,000 per year on average).

“Devastating” loss of income

One word shows up in a lot of communications about this proposal: “devastating.” James Conway, a server with 14 years at a chain restaurant in Pittsburgh, PA, says that rolling back the rule would be “devastating” to workers in the front of house. He says that on a “really good day,” he can make up to $100 for a four-hour shift. “But with this move, they could take it all away.” All but the $31 that the restaurant would be required to pay him as the local minimum wage ($7.83 an hour); the rest would belong to the employer.

Servers work hard during those hours: bringing food to the table, handling transactions, seating customers, putting in orders, clearing and resetting tables, and – in his establishment– monitoring and refilling the bottomless bowls of soup and salad (which takes a lot of time and effort but doesn’t result in a larger bill or a larger tip).

He notes that serving requires a lot of skill, and hard work: “You have to be a team player, willing to help others and be constantly moving. You need to be very organized, keeping track of several customers. Say someone needs a pat of butter for their bread, that one little thing, they need it at that moment, even if you have orders going in and food coming out, you need to be aware of that one person.”

Finally, after all that, you need to be friendly and entertaining. Conway notes that women – who constitute 80 percent of the workers who will be affected by this rollback – are especially vulnerable to this aspect of “service work” expectations. “Women are always aware they need the tips, so they’re willing to put up with so much; the customer is paying them, so they have to face all kinds of harassment.”

Moreover, it’s hard to stitch together a full workweek of hours. Most servers work a split shift– lunch and dinner– leaving free time in the middle of the day. Conway says that well over a third of the other servers have a full time job elsewhere, and then take on extra hours at the restaurant.

Servers get no paid sick time, and few get paid vacation time. To be eligible for vacation, they need to work a minimum of 30 hours per week average for a solid year, which few can manage.

While the restaurant industry thrives, wages stagnate

As in many industries, compensation for restaurant executives has been skyrocketing over the last few years. The CEO of a company that owns several chains made well over $6 million in 2017, an increase of 300 percent over five years. In that time, the federal minimum wage went up zero percent (from $7.25 to $7.25); and the tipped federal minimum wage went up zero percent (from $2.13 to $2.13).

Even including tips, the median hourly earnings for servers and bartenders is $10.11; black and Latinx workers on average make even less, meaning the rule change would especially impact workers of color. Roughly 2.5 million work as waiters and waitresses; seven of the ten lowest paid occupations in the U.S. are restaurant occupations.

“Calling that money a ‘tip’ is a bit of a misnomer,” says Alex Galimberti, currently Senior Advocacy and Collaborations Advisor at Oxfam, who previously worked as Lead Organizer with ROC. “Everyone in the restaurant industry knows that tips are an absolutely essential part of take-home pay. Workers rely on tips for everything from rent to transportation. If those tips went into the pockets of the employer, workers would be desperate to survive.”

Yet another blow to workers

Historically, protecting workers and improving economic mobility was a cornerstone in the DOL’s mission. However, since President Trump took office, the DOL has reversed many regulations that protected workers’ health and wages. Starting with the reversal of DOL’s position on raising the wage ceiling for overtime to proposing cuts for workforce development, the administration has been resetting the rules in favor of employers.

The DOL should be making rules that protect workers and keep them out of poverty; this move is another threat to the livelihoods of working people.

Take action

Submit your comments to the DOL before February 5. Submit comments on this page, or text TIP to 225-568.

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  1. Meadowlark605@yahoo.com'Rhoda Burrows

    Why penalize workers who do a good job. As a customer, if I tip, I expect the $ to go to the worker, and I would be very angry to find out they didn’t. Customers will stop tipping, and restaurants won’t be able to find good workers. Don’t “fix” something thats not broken.

    Reply
  2. erikalross59@gmail.com'Erika Ross

    I have waitresses for 42 years. It was my only recourse as a single Mom. The min wage only went up 3 times in that time.As it is we tip from our own pockets bus people and bartenders and no tips on takeout which is added in with our total sales. Every waitress claims between 8 and 10 % of total sales as is. It was only 10 years ago they were added onto pay and taxes as well. No medical and no paid sick days or vacation. The establishment keeps you under 30 hours. There are the few abusers who pay some under the table so they can collect Fed gov. benefits. Not fair to honest workers. This is really beyond belief. What you people should be checking is the workers and owners who do this kind of thing. As it is already exhausting work we don’t need to put on any more hats and not get paid for the extra jobs done already. Set up, breakdown, vacuuming, cleaning Windows , bathrooms, coolers , fridges and sometimes dishes too. Please investigate all we do and tip out and claim before taking what we personally earn. Thank you

    Reply
  3. katrandolph65@yahoo.com'Katherine

    This is patently unfair to the millions of tipped workers in the restaurant industry and hurts those that are struggling to get by the most. I am urging the DOL to do their jobs and help workers, not line the pockets of wealthy restaurant owners.

    Reply

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