The Tipping Point: What the DOL’s Support of Tip-Credit Means for Restaurateurs

The restaurant industry is a unique, evolving business model. Fast-paced and never dull, determining an employee’s direct role, wages, and compensation in the scheme of the grand design can be a challenge. Consider what every restaurateur needs to know about the DOL’s recent affirmation of the tip-credit

To Tip or Not to Tip

The debate over tipped vs. non-tipped work has been an ongoing dialogue in the restaurant industry. At the heart of the issue lies the question of fair wages in a field largely driven by gratuities. Of particular relevance to this topic is the question of front of house (FOH) staff and where such roles fit in the scheme of fair wages. It is an industry standard to pay tipped employees a tipped-wage (this is allowed in 43 states), that is far below minimum wage, with the expectation that tips more than make up for the difference. This ability has allowed restaurants to build a business model around cheap labor. The problem is that some duties being assigned to front-of-house staff are not directly tipped; such as setting tables, cleaning glasses, or other auxiliary duties. Due to the discrepancy between wage and opportunity to earn tips, the business ethics of tip-credit have been challenged. Some lawsuits have pointed out that employers intentionally assigned non-tip related duties to FOH staff, while still paying a lower wage. 

Recently, the Department of Labor (DOL) reaffirmed 2009 guidelines protecting full service establishments from underpayment lawsuits alleging that staff is not appropriately compensated for non-tip related duties. Essentially, the DOL issued a statement recognizing non-tipped duties as part of the hospitality role. It is inherent to the job description and reasonable to assume all staff will engage in supporting or administrative duties to support the establishment.

Something to Chew On

So where does this reassertion leave restaurateurs? Not only does the DOL’s statement protect business owners from certain wage lawsuits, but the reopening of a dialogue on tipped work is an opportunity for establishments to evaluate and reassess their practice.

The goal of every business owner should be to create a fair and ethical work environment. It can be difficult to determine how much non-tipped work is reasonable and when an employer is simply taking advantage of his or her staff. 20% of non-tipped duties comprising a given FOH role has been cited as a reasonable expectation. When in doubt, be vocal and transparent with employees regarding the responsibilities and compensation for their role. Listen to employee feedback and be open to suggestions for improvement. A little courtesy can go a long way in avoiding legal troubles down the road.

Looking for more owner insights? Consider whether Your Restaurant Should Stay Open on Thanksgiving or Not.


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