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News from EPI Trump administration finalizes regulation that will cost tipped workers more than $700 million annually

Today, the Trump administration finalized a regulation on tips that gives employers of tipped workers a loophole allowing them to capture more than $700 million annually from workers. Prior to this new regulation, tipped workers had been protected by the very clear “80/20” rule, which says they can spend a maximum of 20% of their time on nontipped duties while still being paid the subminimum wage for tipped workers. The new regulation from the Trump administration does away with this protection, replacing it with vague, much less protective language. In particular, the new regulation allows tipped workers to be paid the subminimum tipped wage while performing an unlimited amount of nontipped duties—as long as those nontipped duties are performed “contemporaneously with tipped duties or for a reasonable time [emphasis added] immediately before or after performing the tipped duties.” “Reasonable time” is not defined, and its ambiguity will make it difficult to enforce, providing employers an immense loophole and leaving workers behind.

It’s important to note that the estimate of the $700 million annually workers will lose as a result of this rule was calculated pre-COVID-19 (the rule was first proposed in October 2019). The impact of this rule will likely be much worse for workers during the COVID-19 era, since nontipped work now makes up a much greater share of work being done in establishments that employ tipped workers (for example, restaurants have shifted their services from dine-in to takeout).

The Trump administration opting, in its last 29 days and during a pandemic, to take more than $700 million out of the pockets of service workers is an emblematic parting blow from this administration to the working people of this country. It is one of dozens of ways the Trump administration has hurt workers over the last four years. The rule will not take effect until after President-elect Biden has been sworn in—the Biden administration should move immediately to postpone the effective date of this rule and use the time to develop a plan to rescind it.


See related work on Income and wages | Wages | Tipped Minimum Wage | Coronavirus

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