'Outrageous' Plan Would Let Employers Steal Worker Tips: Madigan

SPRINGFIELD, IL — Attorney General Lisa Madigan is taking aim at a Depart of Labor proposal that would allow employers to pocket workers' tips for employees who make the federal minimum wage of $7.25 per hour. The plan from the Trump administration would rescind a 2011 rule, giving business owners more control over the tips employees earn.

Madigan this week said she and the attorney generals of California and Pennsylvania are leading a coalition of 17 states in opposing the proposal. In Illinois, an estimated half million workers could have their tips taken away, Madigan said in a statement, calling the proposal "outrageous."

“Not only do workers deserve the money they have earned for the service they provided, but millions of customers who leave tips expect that money to go to the employee who helped them," Madigan said. "Hardworking people will see their earnings essentially stolen by their employer."

Workers Will Lose Billions In Tips Under Trump Proposal: AG

Madigan said the proposed rule change would have a disproportionate impact on women, with the National Women’s Law Center reporting that more than 65 percent of tipped workers in Illinois are women. Women in tipped positions in Illinois also have a high wage gap, making 84 cents on the dollar compared with their male colleagues, according to Madigan. An estimated 17 percent of women working tipped positions in Illinois are living in poverty, she added.

Under the Fair Labor Standards Act (FLSA), employers are required to pay their hourly employees the federal minimum wage. Employers can meet this requirement either by paying employees the full cash federal minimum wage or by paying a lower cash wage, no less than $2.13 per hour, and making up the difference with the tips that the employee earns. The latter practice is known as a “tip credit,” according to Madigan. Rescinding the 2011 rule would allow employers who pay employees the federal minimum wage to take the employees’ tips.

Comments filed this week by Madigan and attorney generals in 16 other states said, in part,

The Notice of Proposed Rulemaking asserts that, by providing employers with greater flexibility to allocate tips among tipped and non-tipped workers, such as cooks and dishwashers, the primary beneficiaries of rescinding the 2011 rule will be the workers themselves. Yet, absent concrete definitions of or limitations on valid tip pool participants, the rescission would permit employers to share in such tip pools or even collect all employee tips as their own. In fact, the Notice itself acknowledges that rescinding the 2011 rule would permit employers to use gratuities left for servers to ‘make capital improvements’ or ‘lower restaurant menu prices’ and notes that tips may be ‘utilized in part (or in full) by the employer.’ As currently drafted, nothing in the rule would prevent employers from simply pocketing gratuities as additional profit. The results could be devastating for tipped employees and misleading to consumers.

Joining Madigan in filing the comments were the attorney generals of California, Connecticut, the District of Columbia, Delaware, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Washington, Vermont and Virginia.

Photo by M. Spencer Green | Associated Press