Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘tipped minimum wage’

What You Need to Know About Washington, D.C.'s Initiative 77 and the Minimum Wage

Wednesday, June 20th, 2018

On Tuesday, Washington, D.C., voters will have an opportunity to vote on Initiative 77, a ballot measure supported by a wide array of progressive and labor organizations that would eliminate the subminimum wage for tipped workers and give many working families a much-needed raise.

Initiative 77 would increase the tipped minimum wage to match the full wage: If it passes, the initiative would phase out the tipped minimum wage, leaving a flat $15 per hour minimum wage for D.C. workers. This would be phased in between now and 2025, giving restaurant and bar owners more than enough time to adjust to the change.

Tipped workers aren’t limited to restaurants and bars: Many other workers get tips, too, including manicurists/pedicurists, hairdressers, shampooers, valets, taxi and rideshare drivers, massage therapists, baggage porters and others. Very few of them get anywhere near the 20% standard you see in high-end restaurants and bars.

The current law is changing, but it will still leave tipped workers behind: The current minimum wage in D.C. is $12.50 an hour, with a minimum wage of $3.33 for tipped workers. If tipped workers don’t earn enough from tips to get to $12.50, employers are supposed to pay the difference. After existing minimum wage increases are fully implemented, the full minimum wage for D.C. will be $15 an hour, while the tipped minimum will increase to $5. The cost of living in D.C. is higher than every state in the United States except Hawaii.

D.C. has a particular problem with the minimum wage: As one of the places in the United States with the highest costs of living, low-wage workers are hit harder by discriminatory laws. D.C. has the largest gap in the country between its tipped minimum wage and its prevailing minimum wage. Tipped workers in D.C. are twice as likely to live in poverty as the city’s overall workforce. Tipped workers in D.C. are forced to use public assistance at a higher rate than the overall population, with 14% using food stamps and 23% using Medicaid.

Wherever tipped wage jobs exist, they are typically low-wage, low-quality jobs: Nationally, the median wage is $16.48 and tipped workers median wage is $10.22. Nationally, 46% of tipped workers receive public assistance, whereas non-tipped workers use public assistance at a rate of 35.5%. Workers at tipped jobs are less likely to have access to paid sick leave, paid holiday leave, paid vacations, health insurance and retirement benefits. Seven of the 10 lowest-paying job categories are in food services, according to the U.S. Bureau of Labor Statistics.

Tipped workers are more likely to end up in poverty: In states where the tipped minimum wage is at the federal standard of $2.13, the lowest in the country, the poverty rate for all workers is 14.5%, which breaks down to 18% for waitstaff and bartenders and 7% for non-tipped employees. What day of the week it is, bad weather, a sluggish economy, the changing of the seasons and any number of other factors completely outside of a server’s control can influence tips and make a night, a week or a season less likely to generate needed income.

The predictions of doom and gloom about raising the minimum wage or the tipped minimum wage never come true: Eight states already have eliminated the tipped wage and the restaurants in those states have higher sales per capita, higher job growth, higher job growth for tipped workers and higher rates of tipping. In fact, states without a lower tipped minimum wage have actually seen sectors where tipping is common grow stronger than in states where there is a subminimum wage. This is consistent with the data from overseas where countries have eliminated tipping and subminimum tipped wages. In states without a subminimum tipped wage, tipped workers, across the board, earn 14% higher. Increased minimum wages lead to employers seeing a reduction in turnover and increases in productivity. And, while there are certainly some exceptions, tippers in states without subminimum wage don’t tip less.

Tipped workers are more likely to be women, making lives worse for them and their families: Of the 4.3 million tipped workers in the United States, 60% of them are waiters and bartenders. Of that 2.5 million, 69% of them are women. Furthermore, 24% are parents, and 16% of them are single mothers. Half of the population of tipped bartenders and waitstaff are members of families that earn less than $40,000. Increasing the tipped minimum wage lets parents work fewer nights and have more time at home with their families. It also helps provide for a more steady, predictable income. Since 66% of tipped workers are women, a lower tipped minimum wage essentially creates legalized gender inequity in the industry. These lowest-paid occupations are majority female. More than one in four female restaurant servers or bartenders in D.C. live in poverty, twice the rate of men in the same jobs.

Harassment and objectification are encouraged by the tipped system: The stories about harassment in the restaurant industry are legion. Servers are forced to tolerate inappropriate behavior from customers in order to not see an instant decrease in income. This forces them to subject themselves to objectification and harassment. Workers in states with a subminimum tipped wage are twice as likely to experience sexual harassment in the workplace. In D.C., more than  90% of restaurant workers report some form of sexual harassment on the job. Women’s tips increase if they have blond hair, a larger breast size and a smaller body size, leading to discrimination against women that don’t have those qualities. Nearly 37% of sexual harassment charges filed by women to the EEOC come from the restaurant industry. This rate is five times higher than the overall female workforce. LGBTQ serversalso face a higher rate of harassment in order to obtain tips. Sexual harassment of transgender employees and men is also high in tipped environments. Some 60% of transgender workers reported scary or unwanted sexual behavior. More than 45% of male workers reported that sexual harassment was part of their work life, as well.

The subminimum tipped wage harms people of color: Research shows that tipping has racist impacts, too. Nonwhite restaurant workers take home 56% less than their white colleagues. Research shows that if the minimum wage had held the value it had in 1968, poverty rates for black and Hispanic Americans would be 20% lower. While many restaurants and bars claim to be race-neutral in hiring, the evidence shows that race often has an impact on who gets hired for jobs that directly interact with customers. And fine-dining environments, the ones where servers and bartenders make the most in tips, are much more likely to hire white servers and bartenders, particularly white males. Also, customers, generally speaking, tip black servers less than white servers. For instance, black servers get 15-25% smaller tips, on average in D.C.

The people behind the opposition to 77 are not worker- or democracy-friendly: Public disclosures show that the Save Our Tips campaign that opposes Initiative 77 is heavily funded by the National Restaurant Assocation. This particular NRA represents the interests of, and is funded by, big corporations, such as McDonald’s, Yum! (which owns Taco Bell, Pizza Hut & KFC), Burger King, Darden Restaurants (which owns Olive Garden, Red Lobster and others) and more. The group spends as much as $98 million to oppose minimum wage increases, safety and labor requirements and benefit increases and requirements. Meanwhile, the CEO of the NRA, Dawn Sweeney, took home $3.8 million in total compensation.

The Save Our Tips campaign is managed in part by Lincoln Strategy Group. In 2016, the group did $600,000 worth of work for the Donald Trump presidential campaign. Lincoln Strategy is managed by Nathan Sproul, a Republican consultant and former executive director of the Arizona Christian Coalition. Sproul has a history of being accused of fraudulent election-related activities, including destroying Democratic voter registration forms and creating a fake grassroots effort to undermine the Consumer Financial Protection Bureau.

Another corporate-sponsored group, the Employment Policy Institute, has come out strongly against the initiative and created a website to attack it and ROC. The Institute is the creation of Rick Berman, a wealthy corporate lobbyist who runs campaigns against public interest groups like the Humane Society and labor unions.

Up until 1996, the tipped subminimum wage had been tied into being 50% of the prevailing minimum wage. That year, legislation decoupled the two and the subminimum wage for tipped jobs has stayed at $2.13 nationally, while some states have raised it. The NRA, headed up then by former Godfather’s Pizza CEO Herman Cain, who would go on to run for president, led the charge to separate the two minimum wages.

The separate tipped minimum wage is a burden on employers and invites misuse: The system of tracking tips and wages so that employers can make up the difference is a complex one that is burdensome for employers. The system requires extensive tracking and accounting of tip flows. Not only this, employers are allowed to average tips over the course of a workweek and only have to pay the difference if the average is less than the minimum wage. Tips can also be pooled among various types of restaurant employees. Tip stealing and wage theft are hard to prove and workers are often reluctant to report them out of fear that they will be given fewer shifts or fired.

Employers frequently fail to pay the balance to their employees: While the law requires to make up the balance when tipped wages don’t reach the full minimum wage, employers often fail to do so. The Department of Labor investigated more than 9,000 restaurants and found that 84% had violated this law and had to pay out nearly $5.5 million in back pay because of tipping violations. How many didn’t get caught?

Restaurants are using union-avoidance tactics to sway employees against the initiative: Numerous reports from workers at D.C. restaurants have made it clear that not only are employers singing on to public letters and posting signs against Initiative 77, they are trying to sway their employees, too. Tactics that have been reported are straight from the union-advoidance industry. Many employers are forcing employees to listen to their opinion on the measure. Others have instructed them to evangelize to customers. Some are sending instructions to their employees on how to volunteer at the polls against the Initiative. Others have shared explicitly political videos with employees. Some managers have gone as far as to speak negatively about community organizations advocating for Initiative 77.

This blog was originally published at AFL-CIO on June 18, 2018. Reprinted with permission.

Trump Dept. of Labor Rule Would Legalize Employers Stealing Workers’ Tips

Friday, December 15th, 2017

Last week, the Trump administration launched yet another front in its war on workers when the Department of Labor (DOL) proposed a new rule that would allow restaurants and other employers of tipped workers to begin legally pocketing their workers’ tips. 

The DOL’s proposed rule would ostensibly allow restaurants to take the tips that servers and bartenders earn and share them with untipped employees, such as cooks and dishwashers. This may sound like as a reasonable change, since kitchen staff are essential to the dining experience. Indeed, we do need to reform how restaurant workers generally and tipped workers specifically are paid, including reducing pay disparities between “front of the house” workers and kitchen staff.

But this proposed rule is not really aimed at fixing these problems. How do we know? Because, critically, the rule does not actually require that employers distribute “pooled” tips to workers. Under the administration’s proposed rule, as long as tipped workers earn the minimum wage, employers could legally pocket those tips for themselves.

Evidence shows that even now, when employers are prohibited from pocketing tips, many still do. Research on workers in three large U.S. cities—Chicago, Los Angeles, and New York—finds that 12 percent of tipped workers had their tips stolen by their employer or supervisor. Recent research also shows that workers in restaurants and bars are much more likely to suffer minimum wage violations—meaning being paid less than minimum wage—than workers in other industries. In the 10 most populous states, nearly one out of every seven restaurant workers reports being paid less than the minimum wage.

In some cases, this is the result of employers illegally confiscating tips. In others, it may be the result of employers asking staff to work off the clock, taking illegal deductions from paychecks or paying less than minimum wage to workers who may feel they cannot speak up—such as formerly incarcerated individuals, undocumented workers or foreign guest workers. These violations amount to more than $2.2 billion in stolen wages annually—and that’s just in the 10 largest states.

With that much illegal wage theft occurring, it should be clear that when employers can legally pocket the tips earned by their employees, many will. And while the bulk of tipped employees work in restaurants, tipped workers outside the restaurant industry—such as nail salon workers, casino dealers, barbers and hair stylists—could also see their bosses begin taking a cut from their tips.

The Economic Policy Institute estimates that under the Trump administration’s proposed rule, employers would pocket nearly $6 billion in tips earned by tipped workers each year. Trump’s DOL even acknowledges that this could occur, stating “The proposed rule rescinds those portions of the 2011 regulations that restrict employer use of customer tips when the employer pays at least the full Federal minimum wage.” In other words, so long as servers, bartenders and other tipped workers are being paid the measly federal minimum wage of $7.25 per hour, employers can do whatever they please with those workers’ tips. The DOL claims that this is actually a benefit of the proposed rule because it “may result in a reduction in litigation”—that is, fewer tipped workers being able to sue employers who steal their pay.

The fact that Trump’s DOL would so brazenly work to undermine protections for one of the lowest-paid, most poverty-stricken segments of the workforce says a lot about this administration’s values. The federal DOL is many workers’ primary source of protection when mistreated by an employer. In fact, 14 states effectively defer their wage and hour enforcement capacity to federal officials—meaning that outside of a private lawsuit, the federal DOL is these workers’ only option for recourse.

An administration that genuinely cared about working people would crack down on employers stealing from workers, not propose to legalize it.

This blog was originally published at In These Times on December 15, 2017. Reprinted with permission. 

About the Author: David Cooper is a Senior Economic Analyst at the Economic Policy Institute.

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