Tip revenue should belong to the workers

Distribution of tips is a major issue among restaurant workers but there is a consensus that should continue to be protected by wage laws — tips belong to workers rather than to the restaurant.

Yet proposed regulations by the Department of Labor, ostensibly to improve compensation for restaurant workers who receive only hourly wages, in effect would give restaurants control of tip revenue to use as they wish.

Especially at high-end restaurants, servers, bartenders and other “front of house” staff receive relatively low hourly wagers and are compensated mostly through tip revenue. Cooks and other “back of house” typically receive higher hourly wages but often do not share tip revenue, meaning that they usually earn substantially less than the front of house staff.

Those disparities are an age-old problem in the industry. They drive turnover and create turmoil in the workplace.

Some staffs share tips across the workforce, some don’t.

Influential New York restaurateur Danny Meyer calls the restaurant tip economy a “hoax on the culture” that enables restaurants to significantly underpay workers. His Union Square Hospitality Group has eliminated tipping at its restaurants in favor of higher base prices, to mixed results regarding customer and employee satisfaction.

The Labor Department’s proposed rule would require restaurants to pool tips, but it does not mandate that tip revenue belongs to workers. In effect, restaurants could use the pooled tips for any purpose, rather than to simply increase pay for back-of-the-house workers.

There is no easy solution because, as in any wage system, an increase in one area likely comes at the expense of a decrease somewhere else. But any new regulation should begin with the guarantee that tip revenue belongs to workers.