Foley & Lardner LLP Of Counsel Mark Neuberger was quoted in the Law360 article, “How Tipping Models Have Evolved to Meet the Moment,” discussing the shift in traditional tipping models and considerations businesses should keep in mind.
Fluctuations in the hospitality industry resulting from the pandemic and the tight labor market have sparked a change in tipping models, showing how the subminimum tipped wage is not the only way to approach hospitality wages. One approach is for restaurants to charge an automatic service fee, which businesses can use to provide pay and health care benefits to waitstaff and back-of-house staff. Another is for restaurants to pay full minimum wage plus tips.
“If a restaurant is considering adopting a service-fee model, it should explicitly say what the charge represents and where the money is going,” said Neuberger. “Whether the employees have a legitimate claim to some or all of the money … Is it just a price increase? Is it going to the employees? Is some of it going to the employees? Is it going to the front of house? To the back of the house?”
Neuberger also noted that standard tipping models bring their own record-keeping burdens and that he would advise any client in the hospitality industry to analyze their business before adjusting the tipping system.