Restaurant servers could be required to share their extra earnings with the cooks and dishwashers in the kitchen under a new rule imposed by the Labor Department.
The final regulation will make it legal for some restaurants to enforce a mandatory tip pool so that tips would be distributed among front-of-house servers and the non-tipped staff members. It’s a “year-end-victory” for the restaurant industry and its workers after years of litigation, according to the National Restaurant Association.
“The changes in this rule bring much needed regulatory clarification for the small business owners and their employees about what the law allows and requires,” vice president of Public Policy and Legal Advocacy for the National Restaurant Association Shannon Meade said in a statement. “At a time when the restaurant industry is faced with instability, this rule provides renewed sensible regulations on tip-pooling and tip-credit standards.”
Proponents of the bill say that tip pools can help businesses cut down on labor costs and reduce wage disparities among all workers.
Moreover, it will lend to closing the gap between the front and back of the house that has disproportionately hurt the cooks and "bus boys." While wages for restaurant servers have gone up, back-of-the-house workers have seen their wages stagnate, even as food costs, menu prices and tips have increased.
“The back of house has been pretty much the same for a while,” CEO of Famous Toastery Robert Maynard told FOX Business. “If you want to get into the restaurant business, you used to want to be in the back, but now, you want to be in the front. You make more money, there are better tips as a server.”
Even though the short-term effects will put business owners in a tiff, as servers will make less money and restaurateurs will be forced to pay more, “in the long term, it will equalize wages,” according to Maynard. The potential for higher earnings will also help bring in more back-of-the house workers, a drought that has been perpetuated by the pandemic.
Maynard says that there could also be a psychological impact on back-of-the-house workers who can take ownership of their daily work and boost efficiency across the board.
Labor advocates, however, have criticized such proposals that enable restaurant owners to boast higher wages without having to spend any of their own money. Consequently, the burden of compensation would also fall on other workers.
Set to go into effect starting February, the new tip sharing mandate will vary state by state, and not all restaurants are willing to comply.
Maynard of Famous Toastery, a 27-unit breakfast, lunch and brunch franchise, says that there is a lot to consider before making a decision, like what the front of the house could make if they will be paid less.
Tips are already stretched thin in the pandemic. A report from a national coalition led by restaurant worker advocates, One Fair Wage, shows that tips have dropped 83% over the course of the pandemic.
“I don’t think that everyone is going to enforce that rule,” owner of Murray Hill Diner in NYC Chris Katsanos told FOX Business’s Kristina Partsinevelos. “It might affect us in the way that we might lose employees and that they’re going to look for another job if that goes into effect.”