The Trump administration wants to let bosses keep their workers’ tips

Labor Secretary Alexander Acosta is now under investigation for allegedly hiding the impact on workers.

The Trump administration has kept its promise to let companies do business with less government oversight. From the Environmental Protection Agency to the Department of Health and Human Services, the administration has rolled backrules on oil companies, banks, and health insurance companies .

Trump’s efforts could soon reach your neighborhood restaurant, barbershop, and nail salon. One of the administration’s major deregulation efforts is currently underway at the Department of Labor — and if implemented, it could potentially hurt millions of American workers who get tips as part of their jobs.

The agency is considering a new rule that would give employers unprecedented control over what to do with a worker’s gratuities. The rule, which the agency proposed in December, would repeal an Obama-era regulation that made official what had been the common view for decades: that tips are the sole property of the workers who earn them. It would essentially allow employers to use their workers’ tips for tip-pooling arrangements, provided their workers make the minimum wage.

If the new rule is finalized, it would be a boon to the restaurant industry, which has been fighting for years to control how servers’ tips are distributed.

“This is a major departure from how the DOL has always interpreted the law,” said Judith Conti, the federal advocacy coordinator for the National Employment Law Project. “It sets policy for all tipped workers: parking attendants, car washers, airport valets, taxi drivers, hotel bellhops.”

The rule would have an immediate effect in at least six states, including Arizona and Nevada, where employers are required to pay the full minimum wage to all tipped workers. (Under federal law, the minimum wage for tipped workers is only $2.13; the full minimum wage is $7.25.)

But even states that don’t require the full minimum wage for tipped workers will be affected. Workers who earn the full minimum wage but still count on tips to supplement their pay — such as barbers and nail technicians — could see their take-home pay affected. (According to one estimate, there are 4.3 million tipped workersin the US.)

The rule would also create an incentive for some restaurant owners in those states to pay servers the full $7.25 hourly minimum wage. That might sound like good news for servers who make only the tipped-worker minimum wage of $2.13 per hour — but if those workers normally make enough tips to push their pay above $7.25, the new rule would allow their employers to take any tips they earn above minimum wage, effectively lowering their take-home pay. Including tips, the average hourly wagefor restaurant servers in the United States was $11.73 in 2016.

The new rule would allow restaurant owners to do two things in particular. First, it would let employers collect the servers’ tips into a pool that would be shared with back-of-the-house workers — dishwashers, cooks, etc. — who have to be paid the regular minimum wage and aren’t typically tipped. Restaurant owners say that back-of-the-house workers should get a share of the tips because they contribute to a customer’s overall experience, but labor rights groups and servers argue that restaurant owners should just pay those workers better, instead of using servers’ tips to subsidize their pay.

But the second way employers could use the tips goes even further than expanding this type of tip pooling. The rule lists examplesof how else employers could use a worker’s gratuities: to renovate their restaurants, lower menu prices, or hire more workers. In other words, it allows restaurant owners to keep the tips for themselves.

The proposal immediately triggered outrage among restaurant servers and labor rights groups, who flooded the Department of Labor with thousands of comments.

The Economic Policy Institute, a left-leaning think tank, estimatesthat the rule would likely transfer about $5.8 billion in tips each year from workers to their bosses — about 16.1 percentof all their tips. Labor Secretary Alexander Acosta reportedly tried to hidean internal analysis showing that the rule could take $640 million from workers (an initial analysis showed it would actually take billions of dollars), according to a Bloomberg investigation. Now the agency’s inspector general is investigating the allegations.

“It’s really, really troubling,” said Sharon Block, a law professor at Harvard who worked at the Department of Labor under the Obama administration and who helped develop the Obama-era rule clarifying that tips were the property of the workers who earned them. “This is no small thing for people who really can’t afford to be subsidizing their employers.”

Despite the backlash, the Department of Labor is still considering implementing the new rule. A spokesperson for the department said the agency is currently in the process of reviewing more than 375,000 public comments it received.

A common response from people who submitted comments about the proposed rule was disbelief: How could it even be legal for employers to keep a worker’s tip?

The custom of tipping has been around since the Middle Ages but didn’t gain momentum in the United States until after the Civil War, when wealthy patrons began tipping carriage drivers and workers at lodges and restaurants. By the mid-20th century, most American customers were giving tips regularlyto reward workers for good service.

The assumption that service gratuities belong to the workers who provided the service is ingrained in American history and culture, but it was never clearly stated in federal law.

Tipped workers have always been treated differently under US labor laws.

Congress didn’t include them when it passed the Fair Labor Standards Act of 1938, which established the 40-hour workweek and a federal minimum wage. The law was later amended to include tipped workers in 1966, but they were still treated differently. Most importantly, the amendment created a sub-minimum wage for tipped workers: 50 percent of the federal minimum. Employers could count a worker’s tips toward the other 50 percent needed to make sure they earned minimum wage. This is known as a “tip credit.” On days when workers don’t make enough tips to earn the federal minimum wage, employers must pay the difference. The sub-minimum wage marked a major change to tipping culture in America, essentially turning customer gratuities into wage subsidies.

In 1996, Congress made another change. It set the minimum wage for tipped workers at $2.13 an hour, instead of calculating it as a percentage of the federal minimum wage (at the time, the full minimum wage was $4.26). Since then, Congress has raised the federal minimum wage — but not the minimum for tipped workers. That means that over the years, tips have become a larger share of workers’ incomes. In response, eight states have passed laws requiring employers to pay tipped workers the full state or federal minimum wage. Some states have raisedthe sub-minimum wage, but 18 states have done neither.

As more states abolished the sub-minimum wage, the Department of Labor decided to clarify its interpretation of the law. It published a rule in 2011 establishing that tips were the property of the workers who earned them, whether or not an employer pays the full minimum wage, and that employers could only pool those tips with other tipped workers.

The powerful National Restaurant Association has pushed back against the idea that tips are always the property of the workers who earned them. The group has long argued that the law only dictates that workers must keep all their tips if they earn a sub-minimum wage, but doesn’t specifically prohibit employers from redistributing, or keeping, tips if they pay the full minimum wage. The new DOL rule, if implemented, would be a win for the restaurant trade group.

For their part, the federal courts are split on the issue of who owns tips.

In 2013, restaurant and casino owners challenged the Obama-era rule in Oregon Rest aurant & Lodging Association v. Perez , arguing that employers can share tips with non-tipped workers as long as they pay servers and bartenders the full minimum wage. The federal district court agreed. But the Ninth Circuit Court of Appeals reversed the decision in 2016, saying that since the law doesn’t specify who owns a worker’s tips, then the DOL had the right to write a rule that clarifies it.

Then in July 2017, the 10th Circuit Court of Appeals came to a different conclusion. Justices uphelda lower court’s ruling in Marlow v. The New Food Guy , saying it was legal for a Colorado catering company to keep tips because it paid a server $12 an hour, which is above the minimum wage.

The NRA has petitioned the Supreme Court to hear the Oregon case decided by the Ninth Circuit. So far, the Court has not added it to the docket.

“This is a fairness issue. If employees working the dining room are not receiving a lower hourly wage (because no tip credit is taken) and are receiving an hourly wage at or above the minimum wage, like employees in the kitchen, there is no good reason to exclude kitchen staff from receiving some portion of tips left by guests,” wrote Angelo Amador, executive director of the Restaurant Law Center, the legal division of the National Restaurant Association.

More than 375,000 comments from servers, bartenders, restaurant owners, and customers have come into the DOL after it announced the proposed rule. Here are a few of them:

From a server in Halfway, Oregon:

From another server(no state disclosed):

And another server(no state disclosed):

Seven legal groups expressed opposition to the proposal, as did attorneys generalfrom 12 states and the District of Columbia.

Ahead of the Department of Labor’s decision to issue the rule, which could take weeks or months, Rep. Rosa DeLauro (D-CT) introduced a bill this month that would prohibit employers from keeping any tips. The Tip Income Protection Act has 12 co-sponsors, who are all Democrats. Without Republican support, it’s unlikely that the bill will go anywhere.

Acosta told lawmakersat a March 6 hearing that employers shouldn’t be able to take tips, but that his department doesn’t have the authority to prohibit them from doing so. He said he supports efforts in Congress to pass a law specifically barring employers from keeping gratuities.