Tipping is embedded in American culture. Not only do people tip restaurant servers, but also coffee baristas, hairdressers, and many other workers in service jobs. Lately the custom has come under scrutiny, with some restaurants doing away with formal tipping and increasing their servers’ wages. There are benefits and risks of both tipping and no tipping policies.

Tipping Practices

Under the Fair Labor Standards Act, restaurant employers are allowed to pay less than minimum wage, but have to at least pay “tipped” minimum wage, which is currently $2.13/hour, as long as the wages plus the tips the employee receives add up to at least the federal minimum wage, which is $7.25/hour for all hours worked. In this capacity, “tipped” employees are defined as those who are engaged in an occupation in which they receive more than $30 a month in tips. 

The problem with this for employers, is keeping track of how much each employee receives in tips to make sure it’s enough to meet minimum wage requirements. This can be especially difficult in restaurants when servers pool their tips, and share them with all employees, such as hostesses.

There has also been research suggesting that there is a race disparity in tips. Customers of all races tend to tip black restaurant servers less than white restaurant servers. This could potentially expose employer to Title VII disparate-impact liability.

No Tipping

With a no tipping policy, employees would have fewer issues dealing with regulating tips, classifying employees as tipped or not, and if pooling arrangements are legal. They would be better at complying with FLSA. This could mean fewer employment lawsuits.

Along with this, it could help the employees financially. They would have a better idea of what their paychecks would look like from week to week depending on their hours.

While it will be a difficult change to make and some employers will continue to short their employees no matter the policy, no tipping may slowly become the norm in America. The idea grabbed national attention when Danny Meyer, the head of the Union Square Hospitality Group, announced he was phasing out tipping at his restaurants in New York City, and plans to go nationwide with the rest of his establishments.

If no tipping policies are adopted by more establishments across the nation, there’s a huge possibility there will be fewer employment lawsuits in relation to servers and their employers. However, until then attorneys, such as those at InnovaCounsel, are there to help with employment law issues.