For many workers in America, their minimum wage paycheck is central to their life and regular income. This is especially true for the case for food service employees, such as waiters and waitresses at restaurants around the country. However, a new proposed change to a Department of Labor (“DOL”) regulation that would allow employers to pool tips together in an attempt to limit the pay gap “between tipped servers and hourly cooks.”((Tim Carman, The Trump administration proposes allowing tip-pooling in restaurants. Critics call it stealing workers’ wages., Wash. Post (Dec. 7, 2017), https://www.washingtonpost.com/news/food/wp/2017/12/07/the-trump-administration-proposes-allow-tip-pooling-in-restaurants-critics-call-it-stealing-workers-wages/?utm_term=.0615e4147ca7))
Under the old DOL regulation instituted under the Obama administration, the rule “had expressly prohibited employers from splitting server tips with traditionally non-tipped employees, such as cooks and dishwashers.”((Id.)) The reasoning behind this regulation was that “the agency was concerned server tips could, among other things, be used to pay the hourly wages of back-of-the-house employees.”((Id.)) However, the rule has not been met without controversy, as several lawsuits were brought in an attempt to strike down the rule on the grounds the DOL had exceeded their statutory authority by implementing this regulation.((Id.)) In response, the DOL under the Trump administration has proposed a change to the regulation to allow employers to share tips amongst tipped and non-tipped workers, which “would help decrease wage disparities between tipped and non-tipped workers – an option that is currently restricted by a rule promulgated in 2011 that has been challenged in a number of courts.”((Edwin Nieves, U.S. DEPARTMENT OF LABOR PROPOSAL GIVES FREEDOM TO SHARE TIPS BETWEEN TRADITIONALLY TIPPED AND NON-TIPPED WORKERS, DOL (Dec. 4, 2017), https://www.dol.gov/newsroom/releases/whd/whd20171204))
According to the DOL, the “proposal only applies where employers pay a full minimum wage and do not take a tip credit and allows sharing tips through a tip pool with employees who do not traditionally receive direct tips – such as restaurant cooks and dish washers.”((Id.)) The reasoning behind this change is that “[t]hese “back of the house” employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers.”((Id.)) While employers are understandably excited to take advantage of this revised regulation, the regulation has already been met with its own share of controversy. Currently, the DOL’s Office of the Inspector General (“OIG”) is now investigating the process the DOL undertook to draft the new rule “in response to reports that the DOL buried internal estimates regarding the proposal’s impact on workers.”((Adam Merrill, Labor Department Under Attack for Tip Pooling Rule, National Law Review (Feb. 8, 2018), https://www.natlawreview.com/article/labor-department-under-attack-tip-pooling-rule)) Further, “Democratic state attorneys general from 17 states — led by California, Illinois, and Pennsylvania—wrote to the DOL threatening litigation on the grounds that the DOL’s failure to release regulatory data on tip pooling violates the federal rulemaking law, and may also violate the Administrative Procedure Act.”((Id.)) And of course others have criticized the proposed amendment because it would essentially allow employers to have the right to control how the tips are distributed, thus ending “the Labor Department’s practice of treating gratuities as the property of workers, a custom that dates to the 1974 amendments to the Fair Labor Standards Act.”((Carman, supra note 1.)) Whether or not the proposed regulation is instituted by the DOL, it serves as another sign of how the Trump administration and its agencies will continue to approach and handle employment related issues over the next few years.
However, in Kentucky, the law approaches tip pooling very differently than the federal Fair Labor Standards Act. Kentucky is one of the few states in the country that makes mandatory tip pooling illegal. KRS 337.065(3) of the Kentucky Wage and Hour Act says:
No employer shall require an employee to participate in a tip pool whereby the employee is required to remit to the pool any gratuity, or any portion thereof, for distribution among employees of the employer.
Kentucky law does allow for employees to enter into voluntary tip pooling arrangements, but an employer can’t coerce or require employees to join a tip pool.
If you’ve been forced to enter into a tip pool at your job, or if you’re just unsure about what your rights are regarding tipped work, contact one of the experienced Wage and Hour attorneys at Abney Law as soon as possible.