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Trump administration's proposed "tip-pooling" law gives employer control of workers tip

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ASHEVILLE, North Carolina - (WLOS) The Department of Labor is proposing a regulation allowing businesses to collect tips earned by employees. The proposal, first announced in July, would mean the tip you left on the table — intended for your server — may not end up in his or her pocket. Businesses could give that money to non-tipped workers or keep the money as part of their profits.

Tip-pooling means giving out tips — earned by servers — to untipped employees, like cooks if employers share them at all. The proposed changes would rollback a 2011 law passed by the Obama administration that prohibits the distribution of tips to anyone other than the employees who earned them.

Our affiliate WLOS spoke to Michael Napelitano, owner of Manicomio Pizza in Asheville. He said he was against making tip-pooling legal again.

"I think it's a typical stupid Trump idea to harvest the tips from hardworking waiters and waitresses," Napelitano said.

Napelitano said the proposal would take away incentive for his wait staff if owners take away their tips and replace it by giving them the minimum wage which is $7.25 an hour. On average, servers and bartenders make $2.13 an hour plus tips.

"If you were working 100 hours a week, you couldn't make it," Napelitano said.

Under the new rule, employers could pay their waitstaff minimum wage and collect tips to distribute between back and front of the house staff — or employers could pay all employees at least minimum wage and keep the tips for themselves.

The Economic Policy Institute estimates that under this rule, employers would pocket $5.8 billion in tips earned by tipped workers each year. Which would be 16.1 percent of the estimated $36.4 billion in tips earned by tipped workers every year.

“We believe employers will pocket between $523 million and $13.2 billion in workers’ tips annually, with $5.8 billion being our best estimate.”

"I cannot see in what way, shape or form this could possibly be good for workers," Vicki Meath, executive director of Just Economics in Asheville, said.

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Meath says the new rule will hurt women the most. "Nearly two-thirds of tipped workers in this country are women," Meath said.

According the EPI report, of the $5.8 billion, nearly 80 percent—$4.6 billion—would be taken from women who are working in tipped jobs.

Opponents of the new rule point to the current statistics regarding the prevalence of wage theft in industries where workers rely heavily on tips.

“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 tips stolen by their employer or supervisor.”

In a 12-page letter to Labor Secretary, Alexander Acosta, a coalition of attorneys general from 17 states including California, Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Pennsylvania, Oregon, Rhode Island, Washington, Virginia, Vermont, and the District of Columbia said the rule change “would harm low-wage tipped employees who can little afford to subsidize their employers.”

Meath said those tipped workers rarely get 40 hours a week worth of work. "You might work a two-hour shift, a three-hour shift," she said.

Meath said she knew their struggles as a former lunchtime waitress.

"My child was not in school for eight hours. I couldn't work an eight-hour shift, and I needed to be able to make enough money in that time period to at least be able to put a roof over our head and food on our table,” Meath said. “And, if I made $7.25 for those three or four hours, there's no way I could've survived."

Besides, she said, customers should know where their money is going.

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"If I'm tipping this server, is this going to the person who took good care of me?” Meath said. “Or is this going to the restaurant owner? Or is this going to supplement the wages of the back of the house staff so that the restaurant owner can cut those workers' salaries?"

The restaurant industry has lobbied against the Obama's tip-pooling regulation since it passed in 2011.

“We think it’s unfair for a busboy who picks up dirty dishes to be able to get tips but for a dishwasher who cleans the dishes not to be allowed to share the tips,” Angelo Amador, senior vice president and regulatory counsel at the National Restaurant Association, told The New York Times.

But the attorneys general argue nothing in the 2011 rule restricts employers from paying cooks and other back of house employees higher wages. They also point out that there's nothing in the proposed rule that prevents employers from pocketing gratuities as additional profit.

Late Monday afternoon, the labor department’s Office of Inspector General announced that it was undertaking an audit of the rulemaking process used by the department’s wage and hour division related to the proposal to rescind part of the tips regulations after a report by Bloomberg Law raised questions.

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