Tip Jars in Need of Change: The Case for Reforming Employee Tip Regulations in the Fair Labor Standards Act
25 Pages Posted: 24 Jun 2019
Date Written: June 11, 2019
On a daily basis, customers across the United States place food orders from a restaurant by ordering over the phone, online, or through a smartphone application, and later picking up their order at the restaurant. While paying for their order, customers are often presented with the option of either placing cash into a tip jar or adding a tip onto their order by writing in an additional amount on their credit card receipt. Assuming they are satisfied with their experience, customers will almost always leave a tip — never thinking twice about where the tip actually goes. Customers are not tipping a specific person because they were not served by any particular waiter, and they do not know the identity of the kitchen staff who prepared their meal. But who gets the undesignated tip left by the customer?
The answer to this seemingly simple question actually impacts a large sector of the American workforce. In 2016, over one million Americans were employed in a service occupation earning below the federal minimum wage of $7.25 per hour. Many of those employees earned the tipped minimum wage of just $2.13 per hour and had their wages supplemented in large part by customer tips, a significant portion of which were undesignated tips received from tip jars and carryout credit card receipts. Additionally, over 80% of those employees worked in restaurants and other food service establishments. Tipping also affects the roughly 700,000 food service establishments and thousands of other service industry businesses in the United States, who employ these individuals and bear much of the administrative burden associated with managing tips.
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