Cost ReductionStaff

Tip Pooling Legislation

The U.S. Department of Labor has issued new tip pooling legislation that permits restaurants to pool the tips that servers receive, so that those funds can be shared with back-of-house staff members (as long as tips don’t count toward the wages they are due). This rolls back Obama-era regulations that prohibited tip-pooling, or distributing tips to anyone other than the front-of-house staff who directly earned them. Read on to learn more about how this change could affect restaurants and their staff.

Pros of the new legislation

Supporters of this change insist that it will better level the playing field between front- and back-of-house staff. There is a growing disparity between the earnings of tipped employees like servers, and back-of-house employees like dishwashers and cooks. Because of the new regulations, employers are allowed to take all tips earned by the front-of-house staff and redistribute them throughout the restaurant staff. This excludes management and owners. This could be a boon to back-of-house workers. In some areas, wait staff can make upwards of $30 an hour with tips, while cooks and dishwashers still make barely above minimum wage. 

In addition, pooling tips makes a restaurant feel more like a team environment. Instead of just wait staff working for tips, everyone is working together to create the best possible dining experience for customers. 

Cons of the new legislation

While this sounds like a great idea for everyone involved, there are some potential drawbacks. The legislation only applies to workers who are already paid minimum wage, and most states currently allow tipped workers to be paid a “tipped wage” at a rate less than the minimum wage. This puts restaurants in a dilemma. In order to be able to pool the tips, they have to pay minimum wage, and for a restaurant that is currently paying a tipped wage this legislation may have little affect. 

We have yet to see how this directive will affect workers, so it’s difficult to say if this will help or hurt both the restaurant industry and its workers. I love to see the conversation around tipping continue to evolve and change. Whether we move into “hospitality included” or a more equitable split it is going to be important to help bring up the wages in the back of house. 

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