The Labor Department has proposed a policy change that, if implemented, would designate restaurant employers as “owners” of tips paid by patrons. The proposal claims to give employers the freedom to distribute tips more equitably among workers but doesn’t require that distribution, or any distribution at all — meaning employers could legally keep tips for themselves. This parts with decades of Fair Labor Standards Act policy in which tips are considered the property of workers. Why would you bother leaving a tip in the first place if you have no idea in whose pocket it might or might not end up?
On one hand, it is heartening to see that the Labor Department has shown some willingness to rethink the arcane restrictions around tip distribution. Under current regulation, tips can be shared only with “guest-facing” service staff, which means cooks and dishwashers take home considerably less. That has created a troubling wage disparity, and our industry is fed up. But dictating tip distribution is not the way to solve the problem. Tips themselves are the problem, and we need to stop relying on them as a means to compensate this massive workforce.
Two years ago, my company, Union Square Hospitality Group, decided to do just that. We began the process of eliminating tips in our New York restaurants and built the full cost of compensating our entire staff into our menu prices. We did it to decrease the pay gap between servers and cooks and to provide transparency into the true cost of operating a restaurant. More significantly, we did it to provide our employees with the professionalism that is standard in most other industries:
Consistent and predictable wages. On a snowy night — or a slow Monday after a holiday — a tipped employee won’t go home with much of a return for the hours worked. Do you get paid less at your job on days when the weather is lousy?
A clearer path for career development. In a tip house, cooks work for the chef, while servers work for the countless guests they serve — many of whom just aren’t knowledgeable bosses. Removing tips means the responsibility to compensate is fully our own, so pay can become a true reflection of merit, and we can determine what the path for career growth looks like. Why are we entrusted with doing that for our cooks but not our servers?
Work-life balance. Servers make more money when they work the lucrative weekend dinner shifts. But what about the server who is a parent, who just might want to be with family over the weekend? In tip-free restaurants, workers’ wages are more consistent shift to shift. Flexible scheduling aside, I’ll go out on a limb and suggest that most tip houses do not provide their tipped employees with a 401(k) plan, a generous parental leave plan (at USHG, all new parents — birth or adoptive — are eligible), English as a Second Language education, paid time off, and health care.
Eliminating the served-servant power dynamic. It has been documented that tipping increases the incidences of discrimination and guest-driven sexual harassment, as certain patrons expect something more in exchange for their tip than just speedy service. For the multitude of servers who bring hospitality from their hearts, it is liberating to eliminate any sense that they must put up with unwelcome behavior.
Forswearing tips hasn’t been easy for many of our stakeholders — especially when the policy was first put in place. While cooks and entry-level managers got an immediate raise, some longtime dining-room servers, who had worked their way to lucrative weekend dinner shifts, took an initial pay cut. Some guests were taken aback by escalated menu prices, now that the cost of compensating service employees is built in. (Most appreciate that there is no tip line on the guest check and also enjoy not having to buy their jacket back from the coat check.) And given that menu prices haven’t been raised quite high enough to cover all of our costs associated with eliminating tipping, investors are rightly concerned about near-term profit margins. But this is a long-term strategy to do the right thing, which almost always ends up being better for the bottom line.
Tipping servers is deeply ingrained in American dining culture, and it certainly won’t disappear overnight. But the Labor Department’s proposal does nothing to advance the sustainability and professionalism of working in our industry, and it might make things far worse. The department should rescind this proposal and continue its legacy of protecting restaurant workers and their wages. Tipping comes with more than enough systemic problems. But until the day they’ve been eliminated everywhere, tips must remain rightfully in the pockets of the people who earn them and not surreptitiously in the hands of management.
Danny Meyers is chief executive officer of Union Square Hospitality Group in New York City, founder of Shake Shack, and author of “Setting the Table.” He wrote this for The Washington Post.