North Carolina Attorney General, Josh Stein, along with Attorneys General in over a dozen states oppose a federal Department of Labor proposal to let employers control the tips of some hourly employees.

Stein today wrote to U.S. Department of Labor Secretary Alexander Acosta in opposition to his proposal to rescind a rule that allows employees to keep the tips they have earned.

The rule, issued in 2011, clarified that, consistent with long-established cultural and legal understanding, gratuities are the sole property of employees. Under the proposed rule change, employees who are paid the federal minimum wage could be forced to hand over the tips they earn to their employers.

“Restaurant servers and bartenders work hard for their tips,” said Attorney General Stein. “When customers leave a gratuity, they expect that money to go to the workers, not the owners. I oppose this U.S. Department of Labor rule because owners shouldn’t pocket their servers’ tips.”

According to the Economic Policy Institute, this rule change could result in employers taking up to $5.8 billion of workers’ earned tips. More than 91,000 people in North Carolina work as waiters or bartenders.

Under the Fair Labor Standards Act (FLSA), employers are required to pay their employees the federal minimum wage. Employers can meet this requirement either by paying employees the full cash federal minimum wage – currently $7.25 per hour – 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.” The proposed rescission of the 2011 rule would allow employers who pay employees the federal minimum wage to claim the employees’ tips for any purpose.

Attorney General Stein took today’s action with the Attorneys General of California, Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Pennsylvania, Oregon, Rhode Island, Washington, Virginia, Vermont, and the District of Columbia.


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