The Trump administration is trying once again to tweak the rules that govern how tipped workers are paid. This time, their proposal would probably result in servers doing more nontipped work and at a lower pay rate than previously required.
On Monday, the Labor Department rolled out a new proposed “tip rule” clarifying how employers can divvy up gratuities among their staffs. While most of the plan had been hashed out last year in a compromise with congressional Democrats, it includes a separate recommendation that has angered worker advocates: the elimination of the “80-20 rule.”
In most states, it is legal to pay servers and bartenders a sub-minimum wage, sometimes as low as $2.13 per hour, so long as tips get their hourly rate up to the regular minimum wage. Under the 80-20 rule, a tipped worker can be required to do nontipped work at the lower rate ― like folding napkins and filling up salt shakers ― so long as it doesn’t eat up more than 20% of the shift. If it does, then the worker would have to be paid the full minimum wage ― at least $7.25 per hour, depending on the state ― for that time.
The 80-20 rule has been around since the late 1980s. The administration of George W. Bush tried to gut it at the end of his presidency, but the administration of Barack Obama quickly restored it.
The Labor Department, now headed by recent Trump appointee Secretary Eugene Scalia, wants to get rid of that explicit 20% time limit. Instead, the rule would simply require that the nontipped work be done “contemporaneously” or “within a reasonable time immediately before or after” the tipped work. So long as an employer met that vague criteria, there would be no precise cap on the nontipped work if the administration’s proposal becomes final.
For those who support strong workplace regulations, the language of the proposed rule is far too squishy and could lead to abuse.
“Unfortunately, today, DOL is proposing regulations that make it perfectly legal for employers to take advantage of tipped workers,” Judy Conti, with the left-leaning National Employment Law Project, said in a statement. “We are extremely disappointed, though not surprised, that DOL is again doing the bidding of corporate America rather than the workers it is supposed to protect.”
The 80-20 rule is just the sort of regulation that employer groups and the Trump administration would hate, since it requires restaurants and other tipped businesses to keep track of the work employees are doing to avoid lawsuits.
The Labor Department says dropping the rule would “eliminate this monitoring cost” and save employers money. Under Trump, the agency stopped enforcing the rule last year, but the new proposal would go a step further by doing away with it.
It’s not a stretch to assume servers and other tipped workers will lose out on the deal ― in fact, the Labor Department’s own analysis suggests that likelihood. In its proposal, the agency acknowledges workers will spend more time on lower-paying duties:
The removal of the twenty percent time limit may result in tipped workers such as wait staff and bartenders performing more of these non-tipped duties such as “cleaning and setting tables, toasting bread, making coffee, and occasionally washing dishes or glasses.” … Tipped workers might lose tipped income by spending more of their time performing duties where they are not earning tips, while still receiving cash wages of less than minimum wage.
What’s more, workers in the back of the house who are paid a full minimum wage could end up hurt by the rule as well, the agency notes. That’s because employers would have an incentive to shift nontipped work away from those employees to the tipped workers earning a lower pay rate:
Consequently, employment of workers currently performing these duties, such as dishwashers and cooks, may fall, possibly resulting in a transfer of employment-related producer surplus from those non-tipped workers to tipped workers who work longer hours.
Even though servers could end up doing lower-paying work ― and bussers and dishwashers could lose work hours ― the proposal’s authors do see a potential winner in that scenario:
Employers that had been paying the full minimum wage to tipped employees performing related, non-tipped duties could potentially pay the lower direct cash wage for this time and could pass these reduced labor cost savings on to consumers. [emphasis added]
The proposal did not estimate how much less money servers might earn, or how many fewer hours back-of-the-house workers might have as a result of the proposal. Democrats plan on asking the Labor Department why a projection was not included, according to a spokesperson for Rep. Bobby Scott (Va.), chairman of the House Committee on Education and Labor.
Democrats and the Trump administration have been at odds over tipped workers for years. The administration has wanted to give employers more leeway in how they can divide up gratuities, steering more of the money to back-of-the-house staffers ― a move that could lower restaurants’ labor costs by transferring some wages, in the form of tips, away from servers.
Initially, the administration proposed language that would have allowed employers to do whatever they wanted with tips, including keeping them for the house. After an outcry from liberals and worker groups, the Labor Department under then-Secretary Alexander Acosta agreed to rework the rule.
The version released Monday forbids management from keeping gratuities for itself, but Democrats in Congress are not pleased with the repeal of the 80-20 rule that was added to the new proposal.
Sen. Patty Murray (Wash.), the ranking Democrat on the Senate Committee on Health, Education, Labor and Pensions, said it “appears to betray the compromise” they had struck last year on tips.
As for Scalia, who was confirmed late last month, Murray said he “is already proving exactly what I feared: that he’ll really serve as a Secretary of Corporate Interests.”