February 6, 2018 - SACRAMENTO – California Attorney General Xavier Becerra, co-leading a coalition of 17 Attorneys General, on Monday filed his strong opposition to the Trump Administration’s proposal to rescind a rule that allows all 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 Trump Administration’s proposed rule change, employers would be allowed to pocket tips earned by employees who are paid the federal minimum wage. According to the Economic Policy Institute, this could result in employers taking up to $5.8 billion of workers’ earned tips. The U.S. Department of Labor (DOL), which is spearheading the rule change, reportedly decided to shelve an economic analysis that highlighted the billions in gratuity earnings that workers could lose. 

“When customers tip an employee, they expect their money to go to the employee, not the employer. Hardworking men and women, especially those who are paid close to the minimum wage, depend on every penny they've earned to feed their families, keep a roof over their heads, or advance their education or careers,” said Attorney General Becerra. “The California Department of Justice is prepared to use every tool at our disposal to protect these hardworking Americans. We file our opposition today with a particular sense of urgency, given that the U.S. Department of Labor reportedly took action to obscure the unfavorable economic analysis showing that workers could lose billions in earnings if the proposed change goes into effect.”

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 Trump Administration’s proposed rescission of the 2011 rule would allow employers who pay employees the federal minimum wage to claim the employees’ tips for any purpose.

Unlike federal law, California law requires employers to pay all employees a cash minimum wage and prohibits employers from commandeering “any gratuity or a part thereof” intended for an employee.  However, workers in many other states do not have the same protections.

Joining Attorney General Becerra and co-leaders Illinois Attorney General Lisa Madigan and Pennsylvania Attorney General Josh Shapiro in sending today’s letter are the Attorneys General of: Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Rhode Island, Virginia, Vermont, Washington, and the District of Columbia.

Attachment: Comment of State Attorneys General re Proposed Rescission of Tip Regulations (003).pdf
Source: CA. DOJ