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About Time: DOL Cracks Down on Crooked Restaurants

The Department of Labor (DOL) is starting to catch up with restaurants for stealing the tips their servers make. Most anyone with exposure to the service end of the restaurant industry will concur that it’s about time. 

Tipped employees essentially have to tuck their tip jars under one arm like football players. It took a California state judge and a $100 million class action lawsuit to keep shift supervisors' hands off the tips of Starbucks employees in 2008. Somehow, it took the Department of Labor until February of 2012 to make up its mind that servers do not need to share their tips with kitchen or managerial staff who do not make the “subminimum” hourly wage of employees who report their tips as part of their income.

If any of this makes tipped employees sound greedy or compulsive about their tips, this is far from true. In 2009, the National Employment Law Project (NELP) estimated that the "tipped worker minimum wage would be $4.89 today had it kept up with inflation over the last 40 years." Instead, it’s been stuck at $2.13 since 1991.

Under the Fair Labor Standards Act (FLSA), employers may only legally pay their tip-earners such as servers this low-ball hourly wage if they make more than $30 a month in tips. If the employee does not make enough in tips to at least match minimum wage, the act requires that the employer compensate them for the difference. It’s called “tip credit.”

Restaurant Opportunities Centers United (ROC) gives convincing evidence that restaurant employers often invent creative methods of forgetting about tip credit and exploit its arcane nature to their advantage. Unsurprisingly, the memory of employers in this sector gets even spottier when it comes to paying female employees, who constitute about 72% of all tipped workers, according to the Economic Policy Institute.

Health insurance for servers? Forget it. Elsewhere in their report, NELP estimates that servers "are only one quarter as likely as the workforce as a whole to have a health insurance plan under which their employer pays some portion of the cost.” The most consistent and available data here concerns restaurant servers, but other types of tipped service workers find themselves in similar situations. Out of 432 people who work in the coffee industry, surveyed by, only 160 have health insurance through their places of employment.

The three major problems concerning servers' pay are tip finagling and theft, an unacceptably low hourly wage in most states, and an industry standard that expects them to work without insurance. Demos’s policy brief, “Raise Work Standards,” offers three suggestions that speak directly to the frustrations restaurant servers face: 

  • expand DOL's jurisdiction and enforcement muscle;
  • a hike to the national tipped employee cash wage from $2.13 to $5.50;
  • and provide one paid hour of sick time for every 30 an employee works.

These steps would be a great start to better protecting workers who wait on the millions of Americans who eat out every day.