Tips Are for Servers, Not CEOs

When we give someone a tip, we expect the money will go to the workers who provided us with service.

We might leave a little extra because someone went above and beyond for us. Or because we want that person to have a slightly easier time getting by.

Whatever the circumstance, we trust that the money will help the workers who served us.

But the National Restaurant Association — a group controlled by owners of major restaurant chains —has long been promoting the idea that business owners, not workers,should control the tips we leave.

If they have their way, the Department of Labor will soon let minimum wage employers confiscate all tips left by customers. Business owners would not have to disclose to patrons what happens to tips, and could simply pocket the tips themselves.

This would apply to anyone who receives tips — from the housekeeper who makes up your hotel room, to the valet who parks your car, to the assistant who pushes your wheelchair at the airport.

Overall, women represent two out of three tipped workers.

The NRA’s key leadership includes Olive Garden, IHOP and Applebee’s, Denny’s, Cracker Barrel, Chili’s, and Outback Steakhouse. These companies already have an egregious track record of squeezing workers while inflating CEO pay. If the new rule is finalized, they could use tips to fuel even more stock buybacks and CEO pay hikes.

By doing these companies’ bidding, the Trump administration is poised to make life even harder for restaurant workers and their families. A recent study shows that more than half of hourly earnings for servers and bartenders come from tips.

Restaurant lobbyists claim that giving employers control over tips would let them redistribute tips from servers to non-tipped workers like dishwashers. But there’s nothing in the rule to require this. And even if they do redistribute, there’s a good chance employers would cut base wages to make up the difference.

With the rule change, employers would have a strong incentive to pay only the federal minimum of $7.25 and then claim ownership of all tips. The Economic Policy Institute estimates that changing the rule would transfer $5.8 billion from workers directly to employers, and 80 percent of that amount would come from the pockets of women who earn tips.

To be clear, this rule will hurt workers — and the Labor Department knows it. Revelations that senior political officials there tried to bury a damaging economic analysis of the proposal have led to an internal investigation.

Even with tips, servers and bartenders take home only $10.11 per hour. This is already far below what workers throughout the country need to make ends meet. These employees need more wage protections, not fewer.

And voters seem to agree.

Recent polling from the National Employment Law Project shows 83 percent of voters disapprove of the proposal to give employers control of worker tips, and most respondents say they would tip less often if the rules are changed.

This is an attempt by lobbyists to transfer a massive amount of wealth and power from consumers and workers to corporate restaurant chains and their private equity owners.

That’s backwards: Tips are for servers, not CEOs.

Irene Tung is a senior policy researcher with the National Employment Law Project. Teófilo Reyes is a visiting scholar at the Goldman School of Public Policy at UC-Berkeley and research director with Restaurant Opportunities Centers United. Distributed by OtherWords.org.