Trump's 'Tip-Pooling' Plan Could Screw Your Bartender

The restaurant owner-in-chief wants to give employers more control over workers' gratuities. What could possibly go wrong?
Illustration: Damon Dahlen/HuffPost; Photos: Getty Images

Patrick McCarthy relies on tips to support his family. When a diner leaves one on his table, the career server takes comfort in knowing the tip belongs to him ― not the cook in the kitchen and not the manager in the back office.

At least for now, that is. The Trump administration is seeking to change wage regulations so that restaurants and other businesses with tipped workers can decide how the gratuities are divvied up. McCarthy, who’s waited tables for three decades, is alarmed.

“This is going to take all the control of the tips that I make and hand it right over to the owners,” said McCarthy, a New Lenox, Illinois, resident whose wife is also a server. “It’s going to change the restaurant industry forever.”

Under federal regulations, employers can’t force workers to share their tips with managers or other employees who don’t normally work for gratuities. The tips have to stay among the tipped workers, such as bartenders, servers and barbacks. But the restaurant owner who occupies the White House wants to loosen the rules. Officials in Trump’s Labor Department have proposed eliminating the current regulation in a way that, in many situations, would give employers the leeway to do whatever they want with the tips.

The stated rationale for the proposal seems reasonable enough at first blush. Supporters say they want restaurant operators to be able to shift some of the gratuities to workers in the kitchen, such as the cooks and dishwashers, many of whom are paid low hourly wages and don’t get tips. By legalizing more “tip pools,” the thinking goes, restaurants can spread the wealth and cut down on pay inequities between the front of the house and the back.

Career servers and bartenders interviewed by HuffPost are sympathetic to those aims. But they fear that they’ll lose earnings in order to supplement other workers’ low wages, that unscrupulous employers will pocket a share of the tips for themselves, that diners will tip less due to the confusion and, ultimately, that their line of work will be degraded.

“It’s the Department of Labor doing this, and that blows my mind,” said Scott Hartman, a bartender in Portland, Oregon. “Isn’t it their job to look after us?”

Like so many of Trump’s regulatory rollbacks, this one targets a worker protection imposed under his Democratic predecessor. In 2011, President Barack Obama’s Labor Department implemented a rule stating that tipped employees’ gratuities belong to them and can’t be steered to other employees who don’t work for gratuities. The regulation was meant to clarify the law and prevent schemes like the one at Wynn Resorts in Las Vegas ― run by Trump ally Steve Wynn until he recently stepped down amid sexual abuse allegations ― where casino dealers were forced to share their tips with their supervisors.

At the urging of the National Restaurant Association ― a powerful lobby sometimes called “the other NRA” ― the Trump administration has moved to dismantle Obama’s rule. But the proposal they have crafted does more than just greenlight more tip-pooling. Their reading of the law appears to give employers the right to do with workers’ gratuities as they please in many situations.

“It’s going to change the restaurant industry forever.”

- Patrick McCarthy, bartender

Sharon Block, a former Labor Department official under Obama, said it’s hard to read the proposal any other way. In adopting a judge’s dissent in a tip-sharing lawsuit, Trump’s team seems to argue that the Labor Department can’t tell an employer what to do ― or not do ― with a worker’s tips if the employer pays the federal minimum wage of $7.25. As the judge put it, so long as the workers receive the legal minimum, employers can run tip pools “however they see fit.”

“I’m not sure how, based on their adoption of [the dissent], they could draw a legal distinction between what our regulation did and a rule that says the employer can’t keep the tips,” explained Block. “That’s the danger of the position they’ve taken.”

The Labor Department recently closed its public comment period on its proposal. Officials can take that feedback and tweak the rule, abandon it or leave it as written. In the meantime, congressional Democrats have joined worker advocacy groups in campaigning heavily against the measure, making it perhaps one of the most contentious regulatory rollbacks of Trump’s tenure so far. Bloomberg BNA recently reported that the Labor Department buried an internal analysis showing tipped workers could lose billions of dollars in earnings if the rule was put in place.

Due to the complexity of state wage laws, the Trump proposal is a little more complicated than many of its opponents make it out to be. An employer still couldn’t touch a server’s tips if the employer is claiming what’s known as a “tip credit.” That’s when a restaurant or bar legally pays someone below the normal minimum wage and lets gratuities make up the difference. The majority of states still allow employers to claim a tip credit. Under federal law, a restaurant can pay a tipped worker as little as $2.13 an hour in direct wages before tips, so long as state law doesn’t require them to pay a higher wage.

In theory, then, the workers paid below the normal minimum wage should have nothing to fear from the new proposal, since their employer couldn’t legally redirect or pocket their tips. But there’s a catch. Employers could respond to Trump’s regulation by raising servers’ and bartenders’ base pay to the standard minimum wage ― just enough to gain control of the far more valuable gratuities.

Sneaky as that may sound, many experienced restaurant and bar workers suspect it will happen in some cases. After all, hiking an employee’s base pay to the minimum wage might cost $50 a shift, while the pile of gratuities a server brings in could be worth hundreds of dollars. A restaurant owner could then lower the wages of workers in the back of the house, and use the tips from the front of the house to make up the difference.

“You just take the $2.13 employee and bump them up to $7.50... The owner could do anything they want with [the tips],” explained Hartman, who has 17 years of bar experience. “All it’s going to take is a couple of restaurants. Say 90 percent do the right thing. You’re going to have that [small] percentage of shitty owners, and this is a lot of money we’re talking about.”

While the National Restaurant Association holds the most clout, many small restaurant and bar owners support the Trump proposal, saying it would help them cut down pay disparities. And opposition to the rule isn’t uniform among restaurant workers. Of course many low-paid workers in the kitchen would like to see a share of the tips, even if it means a sacrifice from servers and bartenders. A Maine server named Joshua Chaisson, a self-described Democrat and member of the Trump “resistance,” published “the progressive case for Trump’s tip-pooling rule,” arguing that there is only so much cash to go around in a restaurant, given the industry’s tight profit margins, and that the folks in the kitchen deserve a larger share of it.

“In states that don’t count tips as income, there simply isn’t more money for restaurants to provide raises to the people in the kitchen who need it most,” Chaisson wrote. (There are only seven states without any tip credit.)

But there are several ways tipped workers could lose out under the proposal. The worst-case scenario would be owners legally taking a portion of the gratuities. Backers of the Trump proposal argue that this is an unlikely outcome. After all, they note, no one would want to work for someone who pockets their tips. But, in fact, there are low-road employers who already take a cut of their workers’ gratuities, in ways both legal and illegal.

Kevin Lamarque / Reuters

Some restaurant owners, including celebrity chef Mario Batali, have had to pay settlements for allegedly skimming workers’ tips. Other companies have discovered they can capture a share of gratuities by recasting them as “service” fees, a ploy used by some hotels and sporting venues. They automatically add, say, a 20 percent surcharge to the bill, which customers wrongly assume goes directly to servers, bartenders and bussers. Instead, those workers may receive only a portion of that add-on. The practice has become common enough that several states have outlawed it.

So it’s reasonable to assume that at least some unscrupulous employers would take advantage of the new rule’s latitude. But even if the vast majority use the rule as its backers claim they will ― that is, to raise pay for back-of-the-house staff ― tipped employees would still have a portion of their earnings redistributed to other workers. Just as diners have increasingly subsidized servers’ base wages over the years, the servers could end up subsidizing the wages of cooks and dishwashers.

Laurel Creagh isn’t comfortable with that idea. A server for 17 years, she relies on tips to support her and her mother, whose only income is Social Security. Creagh earns below minimum wage, so her tips couldn’t be appropriated under the new proposal unless her base wage was raised. But as someone used to working for gratuities, the prospect of losing control of her tips unnerves her.

“As a server, I’ve been able to do pretty well by myself, but that’s from being attentive and energetic and being there for my guests, having personality and skill and information,” said Creagh, who works for a chain restaurant she asked not be named.

Creagh believes that her job in the front of the house is different from the jobs in the back of the house. She doesn’t envy the line cook sweating over a hot grill of spattering grease all night, just as the line cook wouldn’t envy her having to smile through interactions with rude diners. She feels she earns the gratuities through her customer service and that those tips should belong to her.

“It’s not that I don’t want cooks or anyone else to make good wages,” she said. “I just look at the way this country is going and the dwindling middle class, and I don’t think lessening [servers’] wages is going to help.”

“It’s the Department of Labor doing this, and that blows my mind. Isn’t it their job to look after us?”

- Scott Hartman, bartender

Different types of restaurants would probably react in different ways to the rule if it goes into effect. Hartman believes the higher-end ones probably wouldn’t divert servers’ tips to other employees, for fear of losing the most experienced and reliable of their wait staff. But he envisions a bleaker scenario at the middle and lower ends of the industry ― large restaurant groups or publicly traded companies that might find the savings hard to resist, especially if they have shareholders to answer to.

“I cut my teeth at Applebee’s,” he said. “It was a great place to start working. I made great money. I don’t think you’ll have people who go into a place like that and don’t make great money stick it out.”

The proposed rule has the potential to alter diners’ behavior, too.

The Labor Department put the proposal up for public feedback, soliciting hundreds of thousands of comments. While most of them appear to be copy-and-pasted form letters in favor or against, many are from diners adamant that their tips stay with the workers they give them to. As one angry commenter put it: “This is absolutely despicable. If employers feel that back of the house employees should be making more, they should give them a raise!!!” Another wrote: “Tips go to the server. Period.”

Some comments seem to justify a fear among servers that if the rule is adopted, diners might assume an owner is pocketing the money and tip less as a result. As one woman wrote: “My family and I eat out a lot and my husband and I are both habitual over tippers. However, if this regulation goes into effect, I will no longer be tipping.”

That possibility has occurred to Tim Baer. He has tended bar for 28 years, the last several of them at Caesars Palace in Las Vegas. His current post is at the casino’s new Gordon Ramsay-run restaurant, Hell’s Kitchen. At 50, he has climbed his way into a union job in the top tier of his field with an employer he respects thanks to years of serious training and study. “In order for me to be employed in this job at my age, I better be damn good at what I do,” Baer said.

Bartending has provided him a decent living and a tenuous hold on the middle class. He lives an hour away from his job, where housing is cheaper, but he’s been able to raise three sons, two grown and a 13-year-old still in the house. When it comes to the new tip rule, Baer isn’t too worried about restaurants like his, where the exemplary service that customers expect requires good wages for workers. But he’s concerned about the industry in general. After all, restaurants close all the time, and someday he may need to find a new one.

“We have generations of people who follow this line of work. This is supposed to be a trade skill,” Baer said. “What am I going to do if they dramatically change the way that money comes in to me? How am I going to do what I’ve been doing for last 28 years supporting my family?”

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