A new Trump administration proposal that would allow restaurant owners to distribute tips as they wish is roiling Maine’s food industry, just months after the conclusion of a heated statewide debate over how restaurant workers should be paid.
Tipping was a hot issue in the November 2016 elections, when Maine voters opted to raise the minimum wage for restaurant workers from $7.50 to $9 in 2017 and to $12 by 2020.
The referendum also called for gradually phasing out the long-used “tip credit,” which lets employers pay servers a base wage lower than Maine’s minimum wage as long as their tips get them to the regular minimum wage by the end of their shift. If not, the employer pays the difference.
But restaurant owners and workers protested the election results, saying the new law would cause customers to tip less and reduce waitstaff earnings. The backlash prompted Gov. Paul LePage and the Legislature in June to restore Maine’s tip credit, which took effect in October.
Now, just weeks after the tip credit’s restoration, Trump’s new proposal is again muddying the question of how to handle tipping.
Greg Dugal, director of government affairs at the Maine Restaurant Association, a trade group in Augusta, said he’s already received calls from confused restaurant owners about how the proposed rule change may impact them.
It largely won’t, he said.
“The new rule applies to restaurants that do not take the tip credit,” he said. “I don’t know of any restaurants in the state that don’t use the tip credit.”
But that word is still getting out.
Amber McIntyre, a full-time server at the Mexican restaurant Pepino’s in Bangor since 2001, keeps strict tabs on her earnings and said the minimum wage vote took an immediate toll on her income. Customers thought she was getting paid $12 per hour so she didn’t need to be tipped.
“My earnings went down 30 percent during the first quarter of 2017 compared to 2015 and 2016,” she said. “A lot of customers were confused.”
While her customers’ tipping habits are now back to normal, McIntyre’s concerned about any more change.
Pepino’s uses the tip credit. But McIntyre says she’d consider leaving the profession if the proposal goes into effect and she has to pool her tips with other employees.
“I may have to reevaluate what I do for a job,” she said. “I’d get $12 an hour at minimum wage in 2020, where I now make $28.86 an hour.”
Rule change aims to close pay gap
The rule change proposed by the U.S. Department of Labor under the Fair Labor Standards Act would throw out Obama-era regulations that define tips as the property of the workers who earn them. Owners could instead group tips together and hand them out as they see fit, including to cooks and others who now typically make less than servers. The new rule also would bring servers to minimum wage.
“The issue is the disparity of pay between the front and back of the house,” Glenn Israel, an employment attorney at Bernstein Shur in Portland, said.
Israel added that a rule change might entice some owners whose servers make high tips to forego the tip credit and distribute tips among non-tipped staff. If a restaurant owner opts to do this, the management also could take tips from the pool, a major point of contention for opponents of the rule change.
The Dec. 5 proposal already has drawn 3,700 comments. The comment period initially was to end Jan. 4, but on Tuesday the DOL extended the period 30 days.
Maine faces an ongoing shortage of all types of restaurant workers. So restaurant owners considering doing away with the tip credit in favor of tip pooling will have to evaluate whether it makes sense to potentially drive away waitstaff to other restaurants that continue to use the tip credit, Israel said. And they’d have to bring their workers up to minimum wage, which in January would double from $5 an hour now to $10.
“I don’t think restaurants will cancel the tip credit,” McIntyre said of the potential new rule. She said she’s always made enough in tips so the restaurant owner didn’t have to make up the difference.
Some in Maine have tried, though, and suffered for it.
Bao Bao Dumpling House in Portland and its sister restaurant Tao Yuan in Brunswick tried unsuccessfully to add a tip surcharge to customers’ checks and paid servers $15 per hour instead of using the tip credit. That increased prices, and they returned to using the tip credit. The restaurant also lost servers.
Bao Bao did not immediately return a request for comment.
Wendyll Caisse, owner of the two Buck’s Naked BBQ restaurants in Freeport and Windham, said removing the tip credit would hurt waitstaff, in testimony before the November 2016 election.
“A server or bartender working for me for five to six shifts per week, (between 25-35 hours total per week), makes between $34,000 to $55,000 annually, [and] changing their pay structure to minimum wage poses the real possibility of a server making $10,400 to $14,560 annually, with the same hours worked and no vacation scheduled … and that’s at $8.00 per hour,” he wrote.
One potential point of confusion is that under Maine statute, an employer can establish a valid tip-pooling arrangement among service, or tipped, employees consistent with the federal Fair Labor Standards Act.
“That section creates some questions about the proposed rule,” Jim Erwin, an employment attorney at Pierce Atwood in Portland, said. “But I don’t think the federal rule will supercede Maine’s.”
Israel added that whatever happens on the federal level, Maine’s Department of Labor would interpret how it wants to enforce the rule and leave the tip credit standing.
A Maine DOL spokeswoman was not immediately available for comment.
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