5 Things to Know About the New Federal Law Protecting Workers’ Tips

As part of the omnibus spending bill enacted on March 23^rd, Congress included a provision that provides America’s tipped workers with strong and unequivocal protection of the tips they work so hard to earn.

It’s a landmark victory for tipped workers—and a testament to how hard they fought the U.S. Department of Labor’s outrageous proposal to allow employers to have complete control over tips as long as they pay their workers the meager federal minimum wage. As the Economic Policy Institute estimated, such a rule would have resulted in employers pocketing nearly $6 billion in workers’ tips annually, an absolutely unacceptable outcome.

Congressional leaders such as Senator Patty Murray (WA) and Representatives Rosa DeLauro (CT), Katherine Clark (MA), and Bobby Scott (VA) fought this proposal every step of the way. Senator Murray was able to negotiate a compromise with the Labor Department that ensures that tips only go into the pockets of workers and no one else.

Here are the five things you need to know about this new law.

Federal law could not be clearer about who gets the tips. The new law explicitly states that “[a]n employer may not keep tips received by its employees for any purposes,” and neither the current Labor Department nor the National Restaurant Association and its members can argue anything to the contrary. (The full text of the new law is here, starting at page 2025.)

Broader tip pooling is now allowed under circumstances that protect all workers. For the first time, federal law will authorize the pooling of tips with restaurant workers in the “back of the house,” such as line cooks and dishwashers, the majority of whom are often people of color and who make extremely low wages. This can only happen, however, when the employer pays everyone at least the full minimum wage, not the sub-minimum wage that federal law and many state laws allow for tipped workers. For workers who are only paid a sub-minimum wage, nothing has changed. They can only be required to share tips with those who customarily and usually receive them.

Managers and supervisors cannot be part of the tip pools. The law prohibits employers from putting managers and supervisors in the tip pools, a practice that is tantamount to back-door wage theft. Employers cannot short-change managers and supervisors with the promise of tips making up the difference.

Most tipped industries probably won’t see any change in tip-pooling practices. The custom of pooling and sharing tips with people other than those on the very front lines of service is mostly an issue for the restaurant industry. Other tipped workers such as valets, airport attendants, and nail technicians work in a much more solitary fashion and don’t really have other people in the “line of service” with which to share tips.

The new penalties for tip theft are significant deterrents. The law provides a private right of action (i.e., the right to bring a civil lawsuit) to recover stolen tips, any short-fall in the minimum wage, and liquidated damages (i.e., an additional amount equal to the stolen tips). The Labor Department can assess civil monetary penalties of up to $1,100 for each violation of the law.

This win for tipped workers shows, once again, the power that workers can wield when they join together in large numbers to fight business lobbyists’ efforts to run them over. Regardless of how the current Labor Department proceeds with its proposed rule, the law is the law now, and tips go only to the workers.