Why Restaurant Operators Should Be Furious with the Department of Labor

Over the past 18 months an intense debate over tipping has been raging in our industry. Plenty of operators have attempted to address escalating labor costs by eliminating tips and adding a service charge to their guest checks. Some have succeeded, some have failed, but all of them have felt compelled to rework their businesses based on the inequities in pay for FOH and BOH staff as well as managing increasingly difficult staffing issues.

The Department of Labor has been largely absent from this conversation until recently when they announced they would repeal an Obama Administration ruling that limited the tip distribution to the employees that served the guests. Essentially the rule change would allow operators to collect all gratuities and distribute (or not) at their own discretion. While there is a healthy debate to be had over this rule that isn’t my focus in this post.

So, what is my focus?

Well, it starts with a recent revelation that the Department of Labor suppressed an unfavorable report on the impacts of tip-pooling rules changes. It turns out that through independent analysis by the Economic Policy Institute this rule change could transfer up to $5.8 billion in gratuities to employers. One thing that needs clarification is that only tipped employees that earn the Federal minimum wage of $7.25 per hour would be subject to the tip pooling rule. However, the distance from tip credited minimum wage and the Federal rate is insignificant in the grand scheme.

Now, I’m not saying that this rule is bad or good. However, what is bad is that the DOL would ever try to hide or obfuscate the results of a policy change, especially one that might impact millions of restaurant employees. As an industry, we should be open and honest about the evidence we use to make decisions about our business. Certainly, government policy ends up picking winners and losers, but the state shouldn’t be dishonest about the facts.

Let’s be straight.

The folks that you employ as servers and bartenders (not to mention barbacks and bussers) depend on the gratuities they receive. A major change to how and what they earn is a serious business disruption. If the rule changes, operators are welcome to implement it, but shouldn’t you have all the information on what the consequences will be of this policy? You wouldn’t want to manage your inventory with data that was massaged to get a certain result; you shouldn’t manage your business policies any differently.

The Department of Labor is supposed to be an arbiter of fair labor practices and when they pick a side as they are doing with the tip pool rules, they end up serving no one.