Business

Iowa AG Tom Miller among 16 attorneys general filing letter of opposition to proposal limiting tip requirements

Labor rule could mean billions in lost tips

Los Angeles Times/TNS

A new proposal from the Labor Department would give employers more control over their workers’ tips.
Los Angeles Times/TNS A new proposal from the Labor Department would give employers more control over their workers’ tips.
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Iowa’s Tom Miller is among a coalition of state attorneys general who argue a U.S. Department of Labor proposal could result in restaurant workers losing billions of dollars in tips each year.

The 16 attorneys general filed a letter of opposition with the department on Monday, the last day of public comment for a proposal that would rescind portions of a 2011 Obama rule that mandated workers receive the tips given to them.

In announcing the proposed change, the Labor Department said it would apply only to workers who earn at least the federal minimum wage of $7.25 and would allow employers to share tips with back-of-the-house workers such as cooks who don’t receive tips.

Critics, however, say employers will simply pocket tips earned by their workers, essentially engaging in wage theft.

“When customers tip an employee, they expect their money to go to the employee, not the employer,” California’s attorney general, Xavier Becerra, said in a statement. “Hardworking men and women, especially those who are paid close to the minimum wage, depend on every penny they’ve earned to feed their families, keep a roof over their heads, or advance their education or careers.”

Along with Miller and Becerra, those attorneys general represent the states of Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Washington, Vermont and Virginia.

According to a Labor Department spokesperson, an employer legally could keep tips for themselves under the new proposal. He said such a scenario would be unlikely, though, because it would reduce the incentive for good customer service and cause workers to find a new job.

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There are roughly 1.29 million waiters, waitresses and bartenders who receive tips nationwide, according to the Labor Department. The new rules would not be restricted to the restaurant industry.

An analysis from the left-leaning Economic Policy Institute found employers would keep $5.8 billion in worker tips each year, about 16 percent of all tips earned.

The proposed change has proved controversial, in part because the Labor Department did not release such an economic analysis with its proposal.

Last week, Bloomberg Law, citing unnamed sources, reported the department did produce an analysis that revealed workers could be out billions of dollars.

The Labor Department spokesperson, who declined to be identified, wouldn’t comment on that story but said the department followed required procedure and would issue an “informed” cost-benefit analysis as part of any final rule.

On Monday, the department’s Office of Inspector General announced it would conduct an audit of the rule-making process used in coming up with the new tip proposal.

If the regulation is changed, tipped workers paid less than federal minimum wage would still keep all their tips.

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