Imagine your life if your boss could arbitrarily—and legally—take away chunks of your paycheck after you earned it and keep that money for him or herself. As strange as it sounds, that was the basic idea enshrined in a recent Trump administration scheme to let restaurant owners take control over their employees’ tips – a scheme that ultimately went too far even for Republicans in Congress.
It’s a curious tale that actually began seven years ago when President Obama was still in the White House, and continued right up until late last month, when reports surfaced of wildly improper rulemaking decisions by Trump officials.
In 2011, the US Department of Labor issued a new rule to clarify the Fair Labor Standards Act—the bedrock set of workplace laws that protect most working people in America—to ensure that tipped workers could not be forced by employers to share their tip income with non-tipped workers.
Under the rule, the practice of “tip pooling,” or requiring tipped employees to share their tips with other tipped workers, remained in place, but employers were blocked from seizing the tips for themselves or forcing wait staff to share their tips with dishwashers and other untipped back-of-the-house employees. And so for seven years, these protections remained in place for restaurant workers across the nation.
Fast forward to the immediate aftermath of the 2016 elections. The National Restaurant Association—the primary lobby for the nation’s restaurant owners—saw an opportunity with unified Republican control of the federal government to achieve its longstanding political objective to strike down the Obama-era policy protecting tipped employees.
In 2017, the “other NRA” spent more than $3 million in lobbying Congress and the Trump administration to overturn the rule. This was on top of the almost $4 million spent on lobbying in 2016 and the $3.8 million in additional lobbying expenditures made by fast food giants McDonald’s and YUM! Brands. For those keeping score at home, that’s $11 million in two years to take down a rule protecting restaurant workers’ tips from confiscation by their employers.
Thanks to these aggressive lobbying efforts, Trump administration Labor Secretary Alex Acosta launched an effort to repeal the Obama-era protections using the standard federal rulemaking process.
But here’s where the story becomes curious. Instead of simply rolling back the 2011 rule, the Trump Labor Department went one step further by proposing a rule that actually gave employers direct, legal control over all of the tips earned by their employees.
Their excuse was that this was all about making sure that hard-working back-of-the-house staff—dishwashers, janitors, everyone who doesn’t earn tips—could benefit from the successes of the front-of-the-house workers. This of course completely disregards the fact that employers could simply pay those employees more in their regular paychecks without seizing some else’s tips to make up the difference.
Unsurprisingly, the Trump plan triggered a massive public outcry. More than 250,000 restaurant workers submitted comments during the period of public comment, almost all of them opposed to the new plan.
Then the other shoe dropped.
In February, Bloomberg reported senior Trump officials had leaned on the career regulators in the Department of Labor to change the analysis they used in assessing how much money restaurant workers would lose should the new tip rule take effect. Eventually, their meddling reduced the official projections of lost worker income down to about $640 million.
Apparently, however, even this watered down impact did not satisfy Secretary Acosta and Office of Management and Budget Director Mick Mulvaney, who simply went over the heads of regulators and refused to include any estimation of the income workers would lose in their final draft proposal. This kind of move is clearly improper, if not legally questionable, given the federal statute that requires full cost estimates to be attached to every rule before it takes effect.
The blowback was predictable. Faced with massive public backlash and viral reports of improper rulemaking, Congress finally stepped in to act in late March, with the full cooperation of an apparently chastened Secretary Acosta. The recently signed federal budget included a provision that explicitly banned employers from seizing their employees’ tips for themselves.
This is undoubtedly good news for restaurant workers, even though some uncertainty for workers remains. Tip pooling has been expanded—the waitress may have to share her tips with the cook—but employers can no longer own or control the tips earned by their employees. And the waitress also has one additional important protection: no tip pooling arrangement can force her to earn less than the federal minimum wage.
As a result, the strange tale that began with President Trump allowing restaurant owners to steal workers’ tips has ended—equally strangely—with Congress saying “no.”
Allan Freyer, Ph.D. is the Director of the Workers’ Rights project at the North Carolina Justice Center.
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