It’s common knowledge that restaurant wait staff in the US make the majority of their pay from tips- but what about employees who never see customers? The Department of Labor (DOL) is planning to permit back-of-house employees to become a part of the tip pool.

AN UPDATE

As of December 5, the DOL has proposed a rule change to allow back-of-house employees to enter the tip pool. They have allowed the public to submit comments for or against the rule change until February. This proposed change would require all employees to make at least minimum wage.

PREVIOUS REGULATION

A 2011 DOL regulation prevented tip pooling to include back-of-house employees in restaurants; even if everyone was making minimum wage. This regulatory act was meant to protect the wait staff, and considered tips to be property of the wait staff.

The law was intended to protect employees who rely mostly on tips for income. The case that brought attention to the matter was Cumbie v. Woody Woo Inc., in which back-of-house employees (who were paid minimum wage) were receiving more of the tip pool than the wait staff. This sparked the conversation that led to the decision that it was illegal to share the tip pool between tipped and non-tipped employees.

Tip pools are legal if they are organized by employees, distribution must be based on level of service or amount of customer contact. Currently, the U.S. Wage and Hour Division has listed: wait staff, bellhops, maîtres’d‘, counter personnel serving customers, bus employees, and services bartenders as qualified tip pool participants as they are traditionally tipped employees. These traditionally tipped employees are the ones that can pool tips together. In addition, anyone who has the ability to hire/fire employees is not entitled to a share of tips from a tip pool. Otherwise, if an employee gets a tip, it belongs to them, not the company.

CHANGES FOR MANAGEMENT

Currently, minimum wage for tipped employees is $2.13 an hour and the employer can claim tip credit. However, if minimum wage is not met after tips, the employer must pay the difference using the tip credit. If a company would like to start practicing tip pooling, wait staff would have to be paid at least minimum wage and could not use the tip credit.

WHY NOW?

One of the seemingly larger benefits of tip pooling is the desire to keep good employees in the kitchen by offering them more money without having to raise their hourly wages. While the split might not be 50/50, it encourages collaboration in order to make the most positive customer experience.

The National Restaurant Association went to the US Supreme Court to reverse the decision that was made in the Ninth Circuit Court after the Tenth Circuit ruled that employers who pay minimum wage are not violating the policy when redistributing tips amongst those who customarily receive tips and those who do not in Marlow v. The New Food Guy, Inc. In this insistence, Relish retained all of the tips, but did not subscribe to the tip credit, therefore not violating the law, dissenting from the position that the Ninth Circuit took in Oregon Restaurant & Lodging Association v. Perez.

WHAT’S ALREADY BEEN DONE?

Chef Zach Pollack lost two good chefs after they got better offers and couldn’t match them. So, he decided to add a “Kitchen” line to the receipt where restaurant patrons could decide whether or not they also wanted to tip the non-front facing staff. Those tips are distributed by length of employment and position, and are kept separate from those tips of servers and other front-facing employees.

Shake Shack implemented a policy in which meal prices went up, but the line for tip was removed off of customer receipts. The idea was that owner Danny Meyer would increase menu prices, paid employees more across the board, and tell customers that service fees were included. There are groups making efforts to help wage distribution equalize.