Serving customers in a restaurant is a tough job. It can be considered one of only a handful of jobs where people’s pay depends on how personable and pleasant they are. Although tips are a significant part of what a waiter takes home at the end of the day, (which makes the job more attractive to those with outgoing personalities and a culture of good service) changes are afoot regarding tips and the way they are collected in U.S. restaurants.
What is Tip Pooling?
A good server who has the people skills and the desire to make customers happy can take home tips that can equal their pay, effectively doubling their salary. In the past, however, some restaurants instituted the policy of forming tip pools. Tip pooling means that servers surrender their tips to a general pool and from that pool the tips are divided among the entire wait staff and back-of-the-house staff (kitchen staff). Tip pooling takes into account workers that do not regularly receive tips or earn manager-level wages, such as bakers, cooks, dishwashers, and bus staff. Not included in the pool are managers, owners, CEOs and food-service directors.
On the surface, tip pooling seems like a fair practice. Since kitchen staff members do not receive gratuities, wait staff have an unfair advantage in the salary department; thus, tip pooling can essentially close the gap on salary differences. However, some restaurant owners have been using tip pooling as an excuse to lower pay to below minimum wage for cooks, dishwashers, and bus staff – whoever will benefit from these tips.
Back in 2011…
In 2011, the tip-pooling practice was banned under President Barack Obama. The U.S Department of Labor (DOL) ruled that tips belong to the server, not the restaurant, regardless of what restaurant workers are paid. At that time, the DOL was taking note of polls that claimed that many restaurant employees – as many as 20% according to some surveys – said that employers were stealing their tips. Unscrupulous restaurant owners assumed that the tips belonged to them, allowing them to skim a portion for themselves, or to keep the tips altogether.
Currently, however, as per the Obama administration rule, employers who pay the tipped minimum wage, which is lower than the standard minimum wage of $7.25 per hour, cannot pool tips and share them with non-tipped workers.
… but in 2017
At the beginning of December 2017, the U.S. Department of Labor proposed eliminating the 2011 ruling that opposed tip pooling. The DOL maintains that tip pooling is an effective way to address pay disparities between servers and other staff, like cooks and dishwashers. Another way to look at it is that the Trump administration’s move to change the current rules is seen as a way to give employers more say over how tips are shared.
For and Against
In a recent article entitled, “Who Owns a Tip? Trump May Shift it to Restaurant Owners,” CBS News discusses the possibility that the new legislation may legalize tip pooling once again. According to the National Law Review, the proposed legislation shift means that restaurant owners could once again take the tips, pool them and divide the money among their employees. The article quotes Patricia Smith, senior counsel at the National Employment Law Project (NELP), who opposes the new legislation (and opposes tip pooling). Smith says, “This is an issue about income inequality…. Maybe workers were making $15 an hour after tips, now they could just make $7.25 [the federal minimum wage],” under the proposed rule.
On the other hand, the National Restaurant Association (NRA), a lobbying group with right-leaning views that represents restaurant owners, tends to bolster the needs of business owners, rather than employees. In contrast with the NELP, the NRA supports the return of tip pooling, saying, “Confining tips to just servers creates a disparity between the ‘front of the house’ and the ‘back of the house.’ They’re all working toward the same goal — to provide the best experience for restaurant guests.”
Pros and Cons of Tip Pooling
Putting aside the legalities of tip pools, the pros and cons of the practice should be explored. What makes a tip pooling policy unfair (or fair) is not necessarily the law itself, but the restaurant’s view of staff as a team. In a restaurant where servers act more as individuals and less as team members, pooling probably won’t work. Every restaurant has a few top servers who are natural-born sellers, who are passionately dedicated to their customers, and who take pride in doing the job as brilliantly as possible. They rarely forget orders, they know how to sell expensive signature dishes, and their customers leave the restaurant feeling as though they’ve gotten VIP treatment. These are the servers who generate the highest bills, with tips that reflect their upselling and charm.
Given what is entailed in offering top-notch service day in and day out, hard-working, high-earning staff members do not want to share their tips with servers and bussers who are not earning as much because they are not trying as hard – and they will vote with their feet. In restaurants where tip pooling is still practiced, wait staff who leave without all the tips they earned through their hard work and commitment can quickly lose patience. In cases like this, instead of being useful, tip pooling can divide the staff, create tensions, and even lead to servers looking for work elsewhere.
From the Customer’s Point of View
In addition to star servers being unhappy about tip pooling, diners might not be excited to learn that the tips they leave for their waiter or waitress aren’t going to the intended recipient, but rather to some vague pool of workers with whom they have had no contact. Tip theft is another serious problem, according to the Economic Policy Institute, it is estimated that workers may lose upward of $50 billion a year in wages and tip theft. Wage theft ranges from failing to pay for overtime, to skimming tips that should go to tipped workers. Savvy and aware customers want their tips to end up in the pockets of the servers who waited on them and not somewhere else.
On the Other Hand…
As mentioned earlier, in an environment where it’s each person for him or herself, a tip pooling policy can spark resentment among employees. On the other hand, in an interdependent, team-minded environment, tip pooling can theoretically encourage more harmonious working relations. In an ideal situation, a happy team with good relationships positively affects all areas of work life, especially productivity. When every person in the pool (who receives tips) is contributing to the greater good, pooling tips is perhaps the only way to guarantee that everyone gets a fair share. If a restaurant staff is a cohesive and interdependent team, then members rely on each other for success. From the moment a customer enters a restaurant to the minute he or she leaves, every team member contributes to that patron having a positive experience. By extension, everyone deserves equal tips.
Where Things Stand Now
As of the beginning of December 2017, the DOL is proposing to rescind the parts of the current regulations that oppose tip pooling. Eliminating the rule, the department says, would provide “employers and employees greater flexibility in determining pay policies for tipped and non-tipped workers.” However, even if tip pooling were to again be legal, individual restaurant owners should determine if it is right for them and their staff. The issue is far from clear-cut, and it deserves careful scrutiny by all restaurant owners.