The Labor Department is changing the tipping rules in a move that could cost workers $ 700 million

The federal government is changing the rules on how tipped workers are paid, in a move that workers’ spokesmen say will take $ 700 million annually from the pockets of servers, bartenders, bellhops and other service workers.

The Department of Labor finalized a rule late Tuesday that allows employers to require workers with tips, such as waiters or bartenders, to share their tips with workers who do not have tips, such as chefs and dishwashers.

The rule also removed an earlier requirement about how much time workers with tips could be required to use work without tips. Previously, the government limited the time a worker with tips could spend on activities without tips to 20% of their shifts. Removing this limit allows employers to drastically underpay workers, according to Heidi Shierholz, director of policy at the left-wing Economic Policy Institute, who worked in the Labor Department under President Obama.

“It allows employers to spend more time working without tips while still getting paid the minimum wage,” Shierholz said.

For workers who rely primarily on customer tips, working without tips is part of the job. Servers and bartenders often help set up a restaurant before opening, or help clean up after the establishment closes and customers leave. The new rule will allow employers to move much more of this work without tips to their lowest paid workforce, EPI said.

For example, instead of having three dishwasher employees, a restaurant could decide to hire only one dishwasher and require everyone to serve periodic washes as part of their shift, EPI said. This would represent a huge saving for the restaurant, which is required to pay dishwashers a minimum wage of $ 7.25, but can pay tip servers as little as $ 2.13 in some states.

Within a year, tipped workers would lose more than $ 700 million under this new rule, EPI estimated last fall. This number has likely increased since the coronavirus pandemic, Shierholz noted. With indoor dining drastically reduced, many restaurants that have managed to stay open have switched to mostly work without tips, such as preparing execution orders.

Survival of an inalienable wage


Share and share alike

According to DOL’s analysis, DOL’s tip-sharing requirements could transfer $ 109 million from employees who tipped to their peers. Payroll and Hourly Administrator Cheryl Stanton said in a press release that the new rule could potentially increase the income of home workers as well as “reduce pay gaps” between customer-facing workers who get tips and workers who do not.

In many restaurants, domestic workers have traditionally earned more than their counterparts at home. Nationally, restaurant work remains among the lowest paid jobs. On average, waiters and waitresses earn only $ 26,600 a year, according to the Bureau of Labor Statistics, while dishwashers earn $ 24,400 and chefs earn $ 27,550.

“You are not solving the low wages of low-wage workers by taking it out of the wages of the second lowest paid workers. You are paying them more,” EPI’s Shierholz said.