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Trump’s Labor Department Says Employees Don’t Own Their Tips

One in five workers already has their tips stolen.

(Image: Lauren Walker / Truthout)

Since taking office, Trump has aimed to undo Obama’s labor legacy and, to date, he’s been fairly successful. His next target is the previous administration’s 2011 amendments to the Fair Labor Standards Act. Obama’s modifications quietly changed the rules on tips: they dictated that workers own their tips regardless of whether they’re paid a low tipped wage (currently $2.13 an hour under federal law) or the federal minimum wage of $7.25 an hour. Prior to the rule being implemented, restaurants controlled the tips and they were able to pool them together and distribute them among their kitchen staff. On December 4, the Labor Department announced plans to eliminate the rule. On October 24, the Office of Management and Budget announced that it has received a proposal from the US Department of Labor to rescind them.

“Taking away federal protections on tips — and whether employers can pocket them — is far from the most effective tool in addressing inequality.”

Critics of the Obama rule claim that a restaurant’s ability to pool tips enables businesses to spread earnings more equitably, increasing pay for “back of the house” workers like line cooks and dishwashers. It’s an interesting argument to hear from conservatives, who often rail against the dangers of redistribution. “When it comes to restaurant tipping, the Trump administration apparently thinks socialism is best,” wrote David Lazarus at the Los Angeles Times.

The National Employment Law Center’s Director of Research Raj Nayak says that the Trump administration’s rhetoric around tips is being used to conceal a much better solution: If employers are genuinely concerned with the wages of their kitchen staffs, they could pay them more money.

“We all care about more equity in the restaurant industry, but taking away federal protections on tips — and whether employers can pocket them — is far from the most effective tool in addressing inequality,” Nayak told Truthout. “Restaurants could take steps to raise wages for their back-of-the-house staff — joining the increasing number of low-wage employers around the country who have acknowledge that creating good jobs is actually good for business.”

Jennifer, a server who works at a restaurant in the Dallas area and relies on her tips for income, says she believes that the rule won’t only impact employees like herself, but that it will ultimately be bad for the back-of-the-house staff as well. “I see this as a long-reaching plan to strip those hard-working employees of their benefits and promotions,” she told Truthout. “As a server, we’re used to being left to fend for ourselves, so to speak. Those who are [back-of-the-house staff] rely on the steady pay and the benefits that come with it…. Servers don’t really get benefits; they regulate our hours pretty hard…. Managers save a lot of money because servers are paid by tips, so it would make sense to try and find a way to slash pay or benefits to hourly employees. They’ve exploited all they can out of those earning $2.13; now it’s time to go after the [workers] making $10.”

The Other NRA

Trump’s tip-pooling decision comes after heavy lobbying from the National Restaurant Association, an organization that represents restaurant owners. The group — which is sometimes referred to as “the Other NRA” by critics because of its lobbying power — spent almost $4 million lobbying during the 2016 election cycle, and they’ve found a powerful ally in the president.

The National Restaurant Association has lobbied against pro-worker policies for years, vigorously fighting minimum wage hikes and paid sick leave rules in a number of cities. In 2011, it spent $100,000 opposing a paid sick day ballot initiative in Denver, which it successfully fended off. After New York Gov. Andrew Cuomo raised the state’s minimum wage in 2015, the organization filed a petition against the decision with the New York Industrial Board of Appeals and, after that was rejected, it filed a formal appeal against that board in New York State Supreme Court. The court upheld Cuomo’s increase in June 2016.

Trump’s tip-pooling move would give more power to businesses in an industry where wage theft is already rampant.

The National Restaurant Association insisted that pay increases could destroy New York’s restaurant industry, and repeated the same warnings when Seattle implemented a law to raise the city’s minimum wage in 2015. Various studies indicate that this assessment is incorrect, but the National Restaurant Association has a history of predicting economic calamities that never arise, corresponding to advances in worker rights. Before “Fight for $15” and Obama’s tip-pooling rule were in their crosshairs, one of the association’s major targets was restaurant smoking bans. The National Restaurant Association claimed that the bans would potentially tank the industry and successfully delayed their implementation in many areas through the efforts of its state trade associations.

Trump and the National Restaurant Association

Donald Trump’s first pick for labor secretary was Andrew Puzder. Puzder was the CEO of CKE Restaurants, the parent company of Carl’s Jr. and Hardee’s, and also an active member of the National Restaurant Association. Puzder had been one of Trump’s biggest supporters on the campaign trail and was named a “Presidential Trustee” to the Trump Victory PAC after donating $75,000 to the PAC directly and bundling additional funds for Trump. Puzder’s nomination was predictably celebrated by the NRA. “We are excited that Andy Puzder will serve as our nation’s next Secretary of Labor,” said National Restaurant Association’s president and CEO Dawn Sweeney in a statement. “He has a proven track record of turning around struggling businesses, and his background in the restaurant industry will help foster an environment for job creation.”

Not only was Puzder an opponent of minimum-wage laws, overtime rules and universal health care, he openly pined for a day when he could replace his workers with robots. “They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case,” Puzder told Business Insider in 2016. Puzder’s restaurants also experienced high rates of wage theft and sexual harassment. Shortly after being tapped for labor secretary, Puzder was sued for allegedly running a wage-fixing scheme to benefit managers at his businesses.

Puzder’s nomination eventually fell apart. Not only was he criticized for his business practices, but past allegations of domestic abuse resurfaced and he admitted to employing an undocumented immigrant as a housekeeper. He withdrew his name for consideration the night before his Senate confirmation after it became clear that he lacked the necessary votes.

After the departure of Puzder, Trump nominated Florida International University law school dean Alexander Acosta to be secretary of labor. Acosta was narrowly confirmed and perceived by many as a moderate alternative to Puzder, but Acosta’s leadership certainly hasn’t weakened the administration’s relationship with the National Restaurant Association. Just one example: In October, Trump ordered the Labor Department to create a Task Force on Apprenticeship Expansion to help guide the administration’s strategy on apprenticeships going forward. The task force is stacked with insiders — including National Restaurant Association CEO Dawn Sweeney.

Support for Trump’s Policies

The National Restaurant Association has been a huge supporter of the Trump administration and GOP’s tax plan. After Trump released details of the plan’s framework at the end of September, the organization praised the administration for attempting to lower corporate tax rates. “The National Restaurant Association applauds the tax reform framework,” declared the NRA’s executive vice president of public affairs Cicely Simpson in a statement. “We look forward to engaging with the President and Congress as the negotiations regarding tax reform continue.”

On immigration, the National Restaurant Association had originally urged “balance” in Trump’s controversial travel ban, asking the president to consider the impact that such an executive order would have on small businesses. However, the organization has since come out in support of a vast e-verify system for workers and enhanced border security.

But perhaps nothing unites the National Restaurant Association and Trump administration as much as the quest to permanently destroy the Affordable Care Act (ACA). The National Restaurant Association aggressively lobbied against the law under Obama. After its passage, the organization filed an amicus brief in support of the National Federation of Independent Business’s lawsuit against the legislation. According to a 2014 report put out by the Restaurant Opportunities Center, the National Restaurant Association created an online “Knowledge Center” with tools to help members urge lawmakers to change the ACA’s definition of full-time employment.

The National Restaurant Association’s efforts paid off as Congress ultimately voted to change the ACA’s definition of full-time work from 30 hours to 40 hours. The change allowed companies with 50 or more employees to withhold health insurance for employees working under 40 hours, without facing any penalty. The Trump administration has dealt the ACA blow after blow since taking control, most recently ditching subsidies for health insurance companies that help pay out-of-pocket costs for low-income individuals. The move was lauded by the National Restaurant Association.

More Power for Owners

Trump’s tip-pooling move would give more power to businesses in an industry where wage theft is already rampant. The Economic Policy Institute (EPI) recently released a report that assessed minimum wage violations in the 10 most populous US states. The EPI found that 2.4 million workers are reportedly paid less than the minimum wage in their state. This amounts to about $8 billion in stolen wages every year and, if these states’ numbers are in line with the rest of the country, the national number is probably around $15 billion. According to some studies, one in five workers is already having their tips stolen. This reality is set to get worse with Trump’s Labor Department making decisions and a powerful industry group guiding policy.

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