New Rule Could Allow Employers to Take $5.8 Billion in Earned Tips Every Year
HARRISBURG — Attorney General Josh Shapiro led a coalition of 17 Attorneys General today to file comments in opposition to a Trump Administration proposal to eliminate protections that allow employees to keep the tips they have earned. One study suggested this proposed rule change could result in employers taking up to $5.8 billion of workers’ earned tips each year.
A rule legally issued in 2011 by the U.S. Department of Labor clarified that gratuities are the sole property of employees. Under the Trump Administration’s proposed rule change, employers would now be allowed to collect tips earned by employees who are paid the federal minimum wage of $7.25 per hour.
“Customers expect the tips they leave for their waiters, waitresses, bartenders and other service workers to go to those employees, not their employers,” Attorney General Shapiro said. “These employees depend on tips to supplement their income, feed their families and pay their bills. Allowing employers to take employees’ tips is unfair and misguided and I filed formal comments today with the Trump Administration opposing it.”
According to the Economic Policy Institute, the proposed rule change could result in employers annually taking up to $5.8 billion of workers’ earned tips. The Department of Labor, which is spearheading the rule change, reportedly decided to shelve an economic analysis that highlighted the billions in gratuity earnings that workers could lose. The coalition is being led by Attorney General Shapiro, California Attorney General Xavier Becerra and Illinois Attorney General Lisa Madigan.
During his first year in office, Attorney General Shapiro created the Office of Attorney General’s Fair Labor Section and appointed the unit’s first-ever Chief Deputy Attorney General for Fair Labor, Nancy Walker.
Under the Fair Labor Standards Act (FLSA), employers are required to pay their employees the federal minimum wage. Employers can meet this requirement either by paying employees the full federal minimum wage – currently $7.25 per hour – or by paying a lower cash wage, no less than $2.13 per hour, and making up the difference with the tips that employees earn. The latter practice is known as a “tip credit.” The Trump Administration’s proposed rescission of the 2011 rule would allow employers who pay employees the federal minimum wage to claim the employees’ tips for any purpose.
Joining Pennsylvania, California and Illinois in sending today’s letter are the Attorneys General of Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Rhode Island, Washington, Virginia, Vermont, and the District of Columbia.
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