Fed’s Proposed Tip Sharing Changes Spark Concerns

OCEAN CITY — Under a federal rule change proposed this week by the Department of Labor (DOL), tipped employees could be required to pool their tips with their back-of-the-house co-workers or even their employers, a proposal that could have long-reaching repercussions in the resort area.

The Trump Administration’s DOL on Tuesday announced a Notice of Proposed Rulemaking (NPRM) regarding the tip regulations under the Fair Labor Standards Act. Under the proposed rule change, employers would essentially have the freedom to collect tips earned by front-line staff such as servers and bartenders and redistribute the tips to other workers such as cooks and dish washers, for example.

In simplest terms, an employer would be able to collect all of the tips earned by front-of-the-house staff and after ensuring the front-line servers are paid the federal minimum wage of $7.25, redistribute the rest of the tips to other workers. Essentially, the rule would allow employers to subsidize the pay of traditionally non-tipped employees on the backs of the tipped employees.

Proponents of the rule change applaud it as a means to reduce or eliminate disparity in wages that often exists between the tipped employees and non-tipped employees. Critics, however, call the proposed rule change a means for employers to pay non-tipped workers more and tipped workers less. Perhaps even more sinister, the rule change could allow employers to collect the tips and not appropriately distribute them to all employees but rather keep the earnings above minimum wage for themselves, some critics claim.

In either case, the proposed rule change could have long-ranging effects in resort communities such as Ocean City and its hospitality-based economy. With hundreds of restaurants, bars, hotels and other hospitality-based businesses, tips are flowing throughout the summer in Ocean City and the DOL’s proposed rule change announced this week could dramatically change how the earnings are redistributed.

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