Tipped Workers Will Get to Keep Their Tips

The omnibus budget bill agreed to last night by U.S. House and Senate negotiators is more than 2,200 pages long and authorizes spending of $1.3 trillion for the rest of fiscal year 2018 and all of fiscal year 2019, which begins on October 1. One provision of the bill won’t cost U.S. taxpayers anything at all: an amendment that permits tipped workers to keep their tips and prohibits employers from pooling the tips and redistributing the money in any way the employer chooses, including keeping some.

Last December, the Trump administration Labor Department proposed a change to the Fair Labor Standards Act that would have rolled back an Obama administration change made in 2011 that allowed tipped workers to keep their tips rather than forcing them to share them with non-tipped workers. The proposed rule, however, did not require employers to distribute the tip pool to workers. Under the proposed rule, as long as the workers earned the federal minimum wage of $7.25 an hour employers could legally keep the tips.

The Economic Policy Institute (EPI) estimated that if the Labor Department’s proposal to allow tip pooling was enacted, tipped workers would lose between $563 million and $14.2 billion in annual tips. EPI’s best estimate indicated an annual loss of $5.8 billion in income.

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Christine Owens, executive director of the National Employment Law Project, said:

The law cannot be more clear: Tips belong to workers and no one else. This landmark victory belongs to all the restaurant servers, bartenders, car wash workers, valets, attendants, and all the other tipped workers in America who fought back when the Trump administration proposed its misguided tip-stealing rule. They wrote in, held protests, signed petitions, and spoke out. That’s what brought Labor Department officials and lawmakers to the table to hash out this historic agreement.

Here’s the money sentence from page 2,026 of the budget bill:

An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.

The bill also specifies that employers who violate the law can be fined and forced to pay back the money they kept illegally, along with “an additional equal amount as liquidated damages … .”

The budget bill now goes the president for signature.

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