Earlier this month, the Trump administration announced a proposed new rule that would allow bosses to legally steal their workers’ tips. A new analysis published Tuesday by the Economic Policy Institute found the rule would lead to employers pocketing $5.8 billion in workers’ tips—or 16.1% of the estimated $36.4 billion in tips earned annually by tipped workers—without any legal assurance that workers would see their money again.
The proposed Department of Labor rule would allow business owners to require tipped employees to pool their tips—supposedly to benefit employees who generally don’t receive tips, like kitchen staff, and to help companies retain these low-wage workers. But the proposed rule also rescinds regulations that “restrict employer use of customer tips when the employer pays at least the full federal minimum wage,” so while employers could use those pooled tips to increase their kitchen staff’s pay, the rule doesn’t prohibit employers from simply pocketing those pooled tips.
The EPI analysis provides one answer to the big question left unanswered by the DOL: how many employers will steal their workers’ tips? The DOL has argued the rule is actually a good, worker-friendly move because lower-income kitchen staff will get to share in the tips; its press release described the rule as giving employers “the freedom to allow sharing of tips among more employees.” But if you don’t actually require employers to do that, some of them will inevitably not share the wealth. Maybe even most of them! Wage theft is already a huge problem, particularly in the service industry, and those who file claims can wait months or years to see any justice. Another EPI study earlier this year found wage theft affects 17% of low-wage workers and a 2010 study by UCLA found “low-wage workers in Los Angeles regularly experience violations of basic laws that mandate a minimum wage and overtime pay.”
But the Department of Labor did not release any estimate of the potential economic impact of this rule. The notice of proposed rule-making suggests it could allow restaurants to “make capital improvements to their establishments (e.g. enlarging the dining area to accommodate more customers), lower restaurant menu prices, provide workers with new benefits (e.g. paid time off), increase work hours, or hire additional workers,” but provided no analysis of how many would employers would actually do any of that compared to how much money workers stand to lose.
The Economic Policy Institute suggested the department didn’t produce its own figures because they know it would lead to a “a substantial shift of tips from workers to employers.” Splinter reached out to the DOL for comment and has not received a response.
The 30-day comment period for the DOL rule is now open, and you can comment here.
Updated: On December 14, EPI revised its best estimate of how much money in tips would be stolen from $6.1 billion to $5.8 billion. The piece has been updated throughout to reflect this.