Tipped Workers to Keep Subminimum Wage: Department of Labor Withdraws Proposed Rule

Introduction

In a major victory for the restaurant industry, the Department of Labor (DOL) has withdrawn a proposed rule that would have raised the minimum wage for tipped workers. The rule, which was published in December 2021, would have increased the minimum wage for tipped workers from $2.13 per hour to $6.00 per hour. The DOL's decision to withdraw the rule is a major setback for worker advocates, who have long argued that tipped workers deserve a higher wage.

Background

The Fair Labor Standards Act (FLSA) sets the minimum wage for tipped workers at $2.13 per hour. However, employers are allowed to take a tip credit of up to $5.12 per hour, meaning that tipped workers can actually earn as little as $2.13 per hour in total wages. This subminimum wage has been in place for decades, and it has been the subject of much debate. Worker advocates argue that the subminimum wage is unfair and that it allows employers to pay their workers poverty wages. Restaurant industry groups, on the other hand, argue that the subminimum wage is necessary to keep labor costs down and that it allows tipped workers to earn more in tips than they would if they were paid a higher hourly wage.

The Proposed Rule

In December 2021, the DOL published a proposed rule that would have raised the minimum wage for tipped workers from $2.13 per hour to $6.00 per hour. The rule would have also eliminated the tip credit, meaning that employers would have been required to pay tipped workers the full minimum wage regardless of how much they earned in tips. The DOL estimated that the rule would have increased wages for tipped workers by $16 billion over the next decade.

The DOL's Decision

The DOL's decision to withdraw the proposed rule is a major setback for worker advocates. The DOL did not provide a reason for withdrawing the rule, but it is likely that the agency was facing pressure from the restaurant industry. The National Restaurant Association, the largest restaurant trade group in the United States, had lobbied heavily against the proposed rule, arguing that it would have raised labor costs and led to job losses.

Conclusion

The DOL's decision to withdraw the proposed rule is a disappointment for worker advocates. However, it is important to remember that the fight for a higher tipped minimum wage is not over. Worker advocates will continue to push for legislation that would raise the tipped minimum wage and eliminate the tip credit. In the meantime, tipped workers can take steps to increase their tips, such as providing excellent customer service and working at restaurants that have a good reputation for tipping.