Some states, such as Alaska and Washington, have laws where waiters will receive compensation for their work on an hourly basis and thereafter, receive compensation for any tips. Some restaurants also have internal policies such as this regardless of what state they are in.
However, there are many states, Utah included, where if an individual receives a tip, that money is counted toward their hourly rate instead of being what a tip is — a tip — and most restaurants pay strict heed to this.
The problem with this is most customers do not know this. Most customers believe that the tip is going directly to the waiter. That is not the case. Instead, the tip is going to the restaurant to pay the wage of the waiter.
When someone goes to a restaurant and buys $30 worth of food and adds a $6 tip, all they are doing is paying the wage of the waiter. They are not giving the waiters additional credit for anything extra they have done.
If customers knew that the tip was going to the restaurant and not the just to the waiter then it wouldn’t be a big deal. It is a big deal though, because it is deceptive or misleading to the customers.
Restaurant-goers think they are making a waiter’s night when they tip, however, they are making the restaurant owner's night. The tips go into the coffers and pay for everyone’s wages, for the food, the buildings, the management, the owners and the shareholders.
Every night, the waiters must report their tips so they can be calculated into their wages. So if someone makes more than minimum wage over a paycheck period, then their hourly rate is reduced to $2.13 an hour instead of minimum wage. For waiters, It's like entering into another tax bracket when their tips go over minimum wage and their wage takes a hit in-house.
If waiters want a bonus, they are up against getting their minimum wage reduced with the tips they earn and making up that difference thereafter. How much waiters receive in tips and how much they see those tips in their paycheck is a stark difference.
If they don’t reach minimum wage, then the company compensates them to ensure that they are compliant with minimum wage laws. However, most restaurants use a method that compensates over the pay period and does not address whether or not an employee was paid below minimum wage on a specific day.
The company and the waiter should have a contract on payment to the employee that should not be contingent on third parties and how much they pay the waiter on tips. If this is the method that companies use to compensate, do they even have a proper employment contract with their employees?
When the customers tip the waiter, that is a gift from the client to the waiter. The contract is between the waiter and the customer outside any payment owed to the restaurant.
If companies want to come in and commandeer their employees' tips, then they should have full disclosure to their customers on where the tips go.
People claim restaurants wouldn’t survive without this method. The thing is though, they shouldn’t be surviving on this method ever. A tip is a tip. If restaurants can’t afford to pay their waiters even minimum wage then they should instead raise their prices on their menus or disclose or define what the tip really is in the eyes of the restaurant.
The result is that restaurants today aren’t paying their waiters, the tippers are. Is that how an industry should be run? From a restaurant-goer’s perspective, they think the waiters are living large, but in reality, they are making ends meet dependent on the gratuity of those they serve. They are essentially beggars without the customers having a clue.
Brian Jackson is the owner of the law firm Brian K. Jackson, LLC in Salt Lake City, Utah and practices primarily in the area of employment and labor law.