Attorney General Lisa Madigan and 16 other state attorneys general have banded together in opposition to a proposed federal rule change that they say would allow employers to pocket hourly workers’ tips.
The change, announced in early December by the U.S. Department of Labor, would rescind portions of a 2011 Obama rule that mandated tipped workers keep their tips. Under the proposed rule change, certain employers could pool tips to share with “back of the house” workers, like cooks and dishwashers, to ensure more equitable pay between tipped and nontipped workers, the Labor Department said – a concept supported by the Illinois Restaurant Association.
But Madigan and others say the rule change would allow employers to take the money that tipped workers earned and pocket it for their own gain. A half million Illinois workers could lose their tips under the rule change, Madigan’s office said. On Monday, the 17 attorneys general, all Democrats, co-signed formal comments in opposition to the proposed change.
“The Department of Labor’s proposal is outrageous. Not only do workers deserve the money they have earned for the service they provided, but millions of customers who leave tips expect that money to go to the employee who helped them,” Madigan said in a statement.
Also Monday, the Labor Department’s Office of the Inspector General announced it would conduct an audit of the rule-making process that led to the proposed change. This follows a recent Bloomberg Law report that Labor Department officials shelved an internal economic analysis that found that workers could lose billions of dollars in tip money.
The proposed change would only apply where employers pay the federal minimum wage of $7.25 an hour. It would not apply when employers pay less than minimum wage and tips make up the difference, a practice known as taking a tip credit.
That’s an important point that gets lost in the debate, said Sam Toia, president and CEO of the Illinois Restaurant Association. In Chicago, for example, a restaurant owner would have to pay servers the $11-an-hour minimum wage and not take a tip credit in order to share tips with employees in the back of the house, Toia said Tuesday.
“We think it’s a positive development. It gives restaurants the opportunity to close the gap between front and back of the house and makes it more equitable,” Toia said.
But the rule lacks “concrete definitions of or limitations on valid tip pool participants” and leaves open the possibility of employers keeping the tip money and not sharing it with those in the back of the restaurant, according to comments signed by Madigan and the other attorneys general.
The Illinois Restaurant Association does not support management and nonhourly staff sharing in a tip pool, said Toia, who emphasized that his lobbyists could work with Springfield legislators to prevent that from occurring in Illinois.
Monday was the final day for comments on the proposed change. Now, those comments – more than 217,000 in total – must be read and evaluated, according to a Labor Department spokesman. There’s no set timeline for that process, at the end of which the rule change might be finalized, modified or withdrawn altogether.
The other 16 attorneys general opposing the tipping rule change hail from California, Connecticut, Delaware, the District of Columbia, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington.
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