Examining the Biden-Harris Attacks on Tipped Workers (U.S. House Committee on Education and the Workforce, Subcommittee on Workforce Protections)

Hearing	Examining the Biden-Harris Attacks on Tipped Workers
Committee	U.S. House Committee on Education and the Workforce, Subcommittee on Workforce Protections
Date	September 18, 2024

 

Hearing Takeaways:

• The U.S. Tip Credit System: The Fair Labor Standards Act (FLSA) provides a tip credit that allows for employers to count a portion of an employee’s tips toward satisfying federal minimum wage requirements. Under the U.S. tip credit system, employers can pay tipped workers a sub-minimum wage so long as the employee’s combined earnings with tips exceed the federal minimum wage. Subcommittee Republicans, Mr. Boucher, Mr. DeCamp, and Ms. Barron argued that the U.S. tip credit system benefits employers through reducing their labor costs and benefits tipped workers through better positioning them to make more than the federal minimum wage. Full Committee Chairman Virginia Foxx (R-NC) and Mr. Boucher also stated that the tipped credit creates an economic incentive for tipped workers to provide better service to customers. Subcommittee Democrats and Ms. Jayaraman stated however that the U.S. tip credit system’s use of a sub-minimum wage results in lower pay, more economic uncertainty, and higher poverty rates for tipped workers. They asserted that that non-compliance with the tip credit’s minimum wage requirement is rampant and that worker reliance on tips makes workers vulnerable to wage theft and harassment.
  • State and Local Efforts to Eliminate the Tip Credit: Subcommittee Chairman Kevin Kiley (R-CA), Mr. Boucher, Mr. DeCamp, and Ms. Barron lamented how many states and localities have eliminated the tip credit. They stated that these eliminations of the tip credit are harming restaurants and restaurant jobs. Ms. Barron stated that the elimination of the tip credit (along with minimum wage increases) has subjected restaurant workers to surcharges, service charges, non-transparent payment models, eliminations of tip lines, eliminations of tipping, mandatory tip pooling to pay non-tipped workers, eliminations of support staff jobs, eliminations of hours and shifts, and losses of jobs due to restaurant closures. Ms. Jayaraman asserted however that the seven states that provide a full minimum wage for tipped workers have the same or higher establishment growth rates, job growth rates, and tipping averages as compared to the 43 states without such requirements.
  • Restaurant Worker Opinions Regarding the Tipped Credit: Subcommittee Chairman Kiley, Mr. Boucher, Mr. DeCamp, and Ms. Barron stated that restaurant workers strongly support the U.S. tip credit model. Subcommittee Chairman Kiley mentioned how a recent survey had found that 90 percent of tipped employees prefer the U.S.’s current tip credit system. He also highlighted how this recent survey had found that 87 percent of tipped employees are concerned that requiring employers to pay higher base wages without counting tips would cause employee earnings to decrease. Ms. Jayaraman noted however that 147,000 petitions from workers were delivered to Congress calling for tipped workers to receive a full minimum wage (with tips supplementing this minimum wage).
  • Underpayment and Wage Theft Concerns: Subcommittee Democrats and Ms. Jayaraman remarked that the U.S. tip credit system results in tipped worker underpayment and wage theft. Ms. Jayaraman noted how the U.S. Department of Labor (DoL) has reported an 84 percent violation rate with regard to employers complying with the rules surrounding the two-tiered wage system. She attributed this high violation rate to low enforcement. She stated that employers can significantly prolong their contestations of wage theft grievances from tipped employees, which can lead tipped employees to settle their grievances for lower amounts. She also stated that employers will engage in wage theft through putting certain positions in tip pools (such as managers and non-tipped staff) that should not be in tip pools. Subcommittee Republicans, Mr. Boucher, Mr. DeCamp, and Ms. Barron dismissed these tipped worker underpayment concerns and cited different reports indicating that tipped workers on average earn more than the minimum wage. They further highlighted how tipped worker positions are highly coveted given their earning potentials and their ability to enable economic mobility.
  • Harassment Concerns: Subcommittee Democrats and Ms. Jayaraman raised concerns that the U.S. tip credit system makes tipped workers vulnerable to harassment because it forces workers to be dependent on customer tips for their financial survival. They argued that this dependence causes these workers to tolerate high levels of harassment from customers. 
• The DoL’s 2021 Tip Regulations under the FLSA: Subcommittee Republicans, Mr. Boucher, and Mr. DeCamp criticized the DoL under the Biden administration for having proposed its 2021 Tip Regulations under the FLSA. They noted how the DoL’s 2021 Tip Regulations under the FLSA would have prevented employers from claiming the tip credit if their employees spend at least 30 minutes on duties that do not produce tips (commonly referred to as side work). They stated that this rule would have imposed onerous requirements on employers to track the activities of their tipped employees and would not have been practical given the labor needs of restaurants. They applauded that U.S. Court of Appeals for the Fifth Circuit for its recent decision to vacate this rule. The Court had ruled that that the regulation does not comply with Administrative Procedure Act, conflicts with the text of the FLSA, and is arbitrary and capricious. Subcommittee Democrats and Ms. Jayaraman asserted however that tipped workers need protections from excessive side work requirements given how they earn a sub-minimum wage. They argued that side work requirements can act as de facto wage theft because side work can limit the ability of tipped workers to generate tips.
  • 80/20 Rule: Mr. DeCamp discussed how the DoL had previously parsed the various activities that restaurant servers, bartenders, and other employees perform to identify situations where employers should not be permitted to take the tip credit. He indicated that the DOL’s assessment of the tip credit had culminated with the DoL’s issuance of the 80/20 rule in 1988. He explained that this rule prevents employers from taking the tip credit for tasks that do not directly or immediately produce tips if the employee spends more than 20 percent of the work week on those activities. He noted how the DoL’s 2021 Tip Regulation under the FLSA was commonly referred to as the 80/20/30 rule because it would have imposed a 30-minute continuous activities requirement on top of the 80/20 rule for employers to be permitted to take the tip credit.
  • Tip Pooling Rules: Ms. Barron also criticized federal tipping pooling rules for enabling employers to take the tips of tipped workers and redistribute these tips to non-tipped workers. She stated that these rules provide an opportunity for wage theft and cause tipped workers lower earnings. Subcommittee Ranking Member Alma Adams (D-NC) and Ms. Jayaraman argued however that the DoL’s 2020 Tip Regulations under the FLSA under the Trump administration would have enabled more pernicious tip pooling practices. They stated that this rule (which the Biden administration rescinded rescinded) have allowed employers to take the tips earned by tipped workers and share these tips with untipped workers and managers so long as the employers paid the federal minimum wage and did not take the tip credit.
  • The Tipped Employee Protection Act: Mr. Boucher and Mr. DeCamp expressed support for the Tipped Employee Protection Act, would prevent the reintroduction of a rule similar to the DoL’s 2021 Tip Regulations under the FLSA. Mr. DeCamp noted that the legislation would clarify that the tip credit is available so long as an employee receives sufficient tips and hourly earnings to achieve a minimum wage. He asserted that the legislation’s approach is “entirely consistent” with the historical purpose of the tip credit and would ensure that tipped employees are no worse off than non-tipped employees with respect to federal minimum wage protections.
• Other Policy Issues: Subcommittee Members and the hearing’s witnesses used the hearing to discuss additional policy issues impacting tipped workers and the restaurant industry more broadly.
  • Flat Hourly Wage Models Without Tipping for Restaurant Workers: Mr. Boucher raised concerns over polices that promote flat hourly wage models without tipping for restaurant workers. He recounted how two New Hampshire restaurants in his area had had closed down shortly after moving from a tip credit model to a flat hourly wage model. He explained that the flat hourly rate created a disincentive for tipped employees to work during high demand hours and caused many tipped employees to look for work elsewhere (because these employees could make greater amounts of money through generating customer tips).
  • Minimum Wage Increases: Subcommittee Ranking Member Alma Adams (D-NC) and Ms. Jayaraman expressed support for policies that would raise the minimum wage. Subcommittee Ranking Member Adams highlighted her support for the Raise the Wage Act of 2023, which would gradually increase the federal minimum wage to $17 per hour and phase out all sub-minimum wages. Subcommittee Republicans and Ms. Barron raised concerns however that state and local efforts to raise the minimum wage are resulting in significant job losses (especially for restaurant workers) and restaurant closures. Ms. Barron also stated that a higher minimum wage would cause restaurants to raise menu prices, reduce shifts for their workers, and change their business models.
  • The Securely Protect Workers (LET’S Protect Workers) Act: Subcommittee Ranking Member Adams also expressed support for the LET’S Protect Workers Act. This legislation (among several things) would increase penalties for and enforcement of violations of worker safety and fair compensation laws.
  • Proposals to Eliminate Taxes on Tips: Rep. Mary Miller (R-IL) and Ms. Barron expressed support for policy proposals seeking to eliminate taxes on tips for tipped workers. They commented that these policy proposals would result in greater take home pay for tipped workers. Mr. Boucher expressed indifference to these policies and stated that there remains uncertainty surrounding the details of such policy proposals. He cautioned that the U.S. would need to develop a new revenue source to offset the lost tax revenue from tipped workers if such policy proposals were to be ultimately adopted.

Hearing Witnesses:

1. Mr. Tom Boucher, CEO-Owner, Great NH Restaurants, Inc., on behalf of the National Restaurant Association
2. Mr. Paul DeCamp, Member, Epstein, Becker & Green, P.C.
3. Ms. Saru Jayaraman, President, One Fair Wage
4. Ms. Simone Barron, Co-Founder, Full-Service Workers Alliance

Member Opening Statements:

Subcommittee Chairman Kevin Kiley (R-CA):

• He discussed how the livelihoods of tipped workers depend on both the tips that they earn and the policies that govern their pay.
• He asserted however that a “misguided” Biden administration rule is putting the jobs and wages of tipped workers at risk.
• He discussed how the FLSA provides a tip credit that allows for employers to count a portion of an employee’s tips toward the federal minimum wage.
  • He explained that this system enables tipped workers to be paid a base wage that is less than the federal minimum wage so long as the employee’s combined earnings with tips exceed the federal minimum wage.
• He described the FLSA’s tip credit as sensible and beneficial to workers because most tipped workers earn far more than the federal minimum wage.
  • He mentioned how a recent National Restaurant Association study had found that the median tipped worker earns $27 per hour.
• He asserted that the U.S.’s current system for tipped workers benefits workers, restaurants, and small businesses.
• He lamented however that “anti-worker policies” that completely phase out the tip credit are proliferating throughout the U.S.
  • He commented that Seattle, Washington’s decision to increase the base wage for tipped employees had resulted in job losses.
• He noted how over four million Americans work in tipped occupations and stated that these Americans are advocating against the elimination of the tip credit system.
  • He highlighted how a recent survey had found that 90 percent of tipped employees prefer the U.S.’s current tip credit system.
  • He also highlighted how this recent survey had found that 87 percent of tipped employees are concerned that their earnings would decrease if employers are required to pay higher base wages without counting tips toward these requirements.
• He stated however that the DoL’s 2021 Tip Regulations under the FLSA would “drastically” restrict the current tip credit.
• He also noted how the DoL’s 2021 Tip Regulations under the FLSA prevent employers from claiming the tip credit if their employees spend at least 30 minutes on duties that do not produce tips.
  • He commented that this provision would effectively require small businesses to continuously track their employees and asserted that this provision is burdensome, invasive, and “out of touch” with the current labor realities.
• He mentioned however that the U.S. Court of Appeals for the Fifth Circuit had recently struck down the DoL’s 2021 Tip Regulations under the FLSA.
  • He commented that while this decision was a “win” for workers and small businesses, he asserted that Congress must do more to combat these policy proposals.
• He concluded that the tip credit provides flexibility for businesses, ensures greater earnings for tipped workers, and supports a thriving U.S. service industry.

Subcommittee Ranking Member Alma Adams (D-NC):

• She discussed how the FLSA allows for an employer to pay a tipped employee a sub-minimum wage of no less than $2.13 per hour and use the employee’s tips to meet the employer’s obligation to pay the federal minimum wage of $7.25 per hour.
  • She commented that this use of the sub-minimum wage results in lower pay, more economic uncertainty, and higher poverty rates for tipped workers than for non-tipped workers.
• She stated that employers often fail to ensure that their employees are making the full minimum wage due to errors or outright wage theft.
  • She referenced a 2014 White House National Economic Council (NEC) and DoL report that had found that more than 10 percent of surveyed workers in predominantly tipped occupations had received hourly wages (including tips) below the federal minimum wage.
• She noted how tipped workers are paid less per hour than non-tipped workers and have less access to various benefits, including paid sick leave, health care, short-term disability, life insurance, and paid vacation.
  • She commented that tipped workers face systemic challenges and often suffer from inadequate pay and rampant abuse.
• She stated that the conditions for tipped workers under the Trump administration had been especially poor and highlighted how approximately half of all jobs in the leisure and hospitality sectors were lost between February 2020 and April of 2020
• She mentioned how the Trump administration’s 2020 tip final rule would have allowed employers to take the tips earned by tipped workers and share these tips with untipped workers and managers so long as the employers paid the federal minimum wage and did not take the tip credit.
  • She asserted that this rule would have allowed employers to steal wages from tipped workers to benefit themselves or to subsidize the wages of non-tipped staff.
  • She referenced a 2017 Economic Policy Institute report that had found that this rule would have resulted in an estimated $5.8 billion in stolen wages from tipped workers annually.
• She accused Subcommittee Republicans of “laying the groundwork” for Project 2025 and warned that this policy agenda would further erode protections for workers.
• She stated that Congressional Democrats by contrast are working to advance legislation that would reduce poverty and hold unscrupulous employers accountable.
  • She expressed support for the Raise the Wage Act of 2023, which would gradually increase the federal minimum wage to $17 per hour and phase out all sub-minimum wages.
  • She also expressed support for the LET’S Protect Workers Act, which would close “loopholes” and enforce penalties for employers who neglect worker safety and fair compensation protections.
  • She further expressed the interest of Congressional Democrats to expand worker access to affordable childcare, overtime pay, and paid time off to take care of loved ones.

Witness Opening Statements:

Mr. Tom Boucher (Great NH Restaurants, Inc., on behalf of the National Restaurant Association):

• He mentioned how he is the owner and CEO of Great New Hampshire Restaurants and indicated that his company has nine restaurant locations and 800 employees.
  • He testified that his company’s restaurants serve over 2 million people annually.
• He recounted how he had begun his career as a restaurant server in 1987 and stated that he had learned every aspect of the restaurant industry “from the ground up.”
• He asserted that the restaurant industry is unique because it provides upward mobility opportunities to anyone, regardless of background.
  • He noted how over 60 percent of Americans have worked in a restaurant and indicated that 80 percent of restaurant owners (including himself) had started in entry-level positions.
  • He commented that the restaurant industry provides opportunities for personal growth, financial independence, and entrepreneurship.
• He remarked however that the restaurant industry is very challenging with low profit margins and regulatory burdens.
• He called the FLSA’s tip credit “vital” to restaurants and explained how the tip credit allows for restaurant employees to earn significantly more than the federal minimum wage while helping restaurants to manage their labor costs.
  • He testified that servers at his company’s restaurants consistently earn $20 or $30 per hour and added that some of his restaurant’s servers earn even higher wages.
  • He noted how no tipped servers make less than the minimum wage and indicated that federal law protects tipped servers from making less than the minimum wage.
• He testified that his company’s restaurant employees support the tip credit and mentioned how some of his company’s employees had launched a campaign website in support of the tip credit.
• He warned that eliminating the tip credit would limit the earning potential of restaurant workers.
  • He recounted how two New Hampshire restaurants had moved from a tip credit model to a flat hourly wage model and indicated that this change had caused the restaurant’s servers to find jobs at other restaurants where their earnings potential was higher.
  • He also mentioned how nearly 1,000 restaurant jobs in Washington, DC had been lost after the city’s voters had passed a ballot initiative to phase out the tip credit.
• He further warned that the elimination of the tip credit would cause labor costs for restaurant operators to “skyrocket” and that these higher labor costs would force these operators to substantially raise prices, cut hours, or shut down.
  • He commented that these new challenges for restaurant operators would in turn harm local farmers, suppliers, and other businesses.
• He then discussed how the DoL’s 2021 Tip Regulations under the FLSA had restricted the amount of time that tipped employees can spend on non-tipped tasks and stated that this rule had created unrealistic and unnecessary burdens.
  • He noted how restaurant employees often must switch tasks to ensure the best possible customer experience and asserted that tracking and limiting these task switches is not practical.
• He applauded the U.S. Court of Appeals for the Fifth Circuit for striking down the DoL’s 2021 Tip Regulations under the FLSA.
• He expressed support for the Tipped Employee Protection Act, which would prevent the reintroduction of a rule similar to the DoL’s 2021 Tip Regulations under the FLSA.

Mr. Paul DeCamp (Epstein, Becker & Green, P.C.):

• He discussed how the FLSA sets forth the federal requirements regarding the minimum wage, overtime, and child labor.
• He noted that while most workers derive their primary or entire income from wages paid by their employer, he indicated that some workers derive a second (and often substantial) source of income in addition to employer-paid wages.
  • He indicated that this second source of income can involve tips from customers, clients, or patrons.
• He discussed how the law has long recognized the tip credit concept, which allows employers in certain circumstances to count a portion of the tips that their employees receive toward satisfying their minimum wage obligations while paying these employees a lower direct wage.
  • He commented that the tip credit acknowledges that a person that receives an hourly wage of $7.25 directly from their employer is on an equal economic footing with a person that receives at least that same amount in direct wages and tips combined.
• He recounted how the DoL had previously parsed the various activities that restaurant servers, bartenders, and other employees perform to identify situations where employers should not be permitted to take the tip credit.
• He indicated that the DOL’s assessment of the tip credit had culminated in 1988 with the issuance of the 80/20 rule.
  • He explained that this rule prevents employers from taking the tip credit for tasks that do not directly or immediately produce tips if the employee spends more than 20 percent of the work week on those activities.
  • He noted how nearly every court that had considered the DoL’s 80/20 rule had upheld the rule based on the U.S. Supreme Court’s decisions in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. and Auer v. Robbins.
• He mentioned how the Biden administration had issued a 2021 regulation codifying the 80/20 principle and had adopted a new principle that employers cannot take the tip credit if a worker spends more than 30 continuous minutes on tasks that do not generate tips.
• He noted how two trade associations had challenged the Biden administration’s 2021 regulation in court and highlighted how the U.S. Supreme Court had issued its Loper Bright Enterprises v. Raimondo decision while the challenge was being considered by the U.S. Court of Appeals for the Fifth Circuit.
  • He indicated that the Loper Bright Enterprises v. Raimondo decision had overturned the U.S. Supreme Court’s previous Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. decision.
  • He explained that the Loper Bright Enterprises v. Raimondo decision requires courts to independently discern the meaning of statutes using all of the available tools of statutory construction (rather than deferring to a federal agency’s preferred interpretation of a statute at the first sign of textual ambiguity).
• He noted how the U.S. Court of Appeals for the Fifth Circuit had then used the Loper Bright Enterprises v. Raimondo decision to rule that the Biden administration’s 2021 regulation did not comply with the Administrative Procedure Act.
  • He elaborated that the U.S. Court of Appeals for the Fifth Circuit had ruled that the regulation conflicted with the text of the FLSA and is arbitrary and capricious.
• He indicated that the U.S. Court of Appeals for the Fifth Circuit’s recent decision had vacated the Biden administration’s 2021 regulation.
• He discussed how the Tipped Employee Protection Act would amend the FLSA in a manner that comports with the U.S. Court of Appeals for the Fifth Circuit’s recent ruling.
  • He elaborated that the legislation would clarify that the tip credit is available so long as an employee receives sufficient tips and hourly earnings to satisfy the minimum wage.
• He asserted that the Tipped Employee Protection Act’s approach is “entirely consistent” with the historical purpose of the tip credit and would ensure that tipped employees are no worse off than non-tipped employees with respect to the protections of the federal minimum wage.
• He then discussed how there have been various recent Executive and Legislative Branch efforts to eliminate the tip credit.
  • He commented that the elimination of the tip credit would require employers to pay tipped employees the full minimum wage.
• He described these efforts to eliminate the tip credit as “misguided” for several reasons.
  • He first noted how tipped workers currently have total earnings (including tips) that average $15.51 per hour, which is more than double the minimum wage.
  • He secondly noted how 97 percent of tipped employees prefer the ability to receive tips when given the choice of either receiving tips and a wage subject to the tip credit or an all-in menu pricing concept with no tipping.
  • He thirdly noted how customers overwhelmingly prefer the option of tipping to having that choice taken away from them.
  • He fourthly noted how approximately three-quarters of American labor economists agree that reducing the tip credit leads to a loss of jobs in service industries.
  • He lastly noted how economic data shows that reducing or eliminating the tip credit does not lead to an increase in weekly earnings for employees.
• He remarked that the U.S.’s current tipping system (including the tip credit) helps workers and warned that eliminating the tip credit would benefit neither workers nor consumers.
  • He stated that the FLSA enables tipped employees to enjoy “substantial” earnings and called on the U.S. to maintain the tip credit system.

Ms. Saru Jayaraman (One Fair Wage):

• She remarked that restaurant and tipped workers have “overwhelmingly” indicated that their top concern is their wages.
• She stated that restaurant worker wage concerns are reasonable given how the restaurant industry is “by far” the lowest paying employer in the U.S.
  • She noted how the seven lowest paying jobs in the U.S. are in the restaurant industry according to the DoL.
  • She added that four of these seven lowest paying jobs are tipped occupations (even when tips are factored into the wage calculations).
• She discussed how the wage structure in the U.S. restaurant industry dates back to Emancipation and noted how waiters in the U.S. prior to Emancipation had mostly been White males.
  • She indicated that these waiters had received a full wage without tip compensation.
• She mentioned how restaurants had sought the ability to hire newly freed Black people (particularly Black women) following Emancipation and base their wages entirely on tips.
  • She commented that the U.S.’s tipping system was unique in that tips comprised the entirety of the wage (rather than a wage supplement).
• She noted how the U.S. had adopted its tipping system in law in 1938 as part of the New Deal and highlighted how tipped workers can receive sub-minimum wages.
  • She indicated that the current minimum wage for tipped workers is $2.13 per hour, which she described as “ridiculous.”
• She discussed how tipped workers are currently “overwhelmingly” women and disproportionately women of color.
• She noted that the median wage of tipped workers (including tips) is $15,000 according to the American Community Survey.
  • She indicated that this wage amounts to $7.40 per hour and emphasized that many tipped workers earn less than this amount.
• She remarked that low wages for tipped workers have these workers caused significant economic instability.
  • She highlighted how tipped workers suffer from three times the poverty rate of other workers, use food stamps at double the rate of other workers, and experience the highest levels of wage theft of any industry within the U.S.
• She mentioned however that seven states (including California, Oregon, Washington, Nevada, Minnesota, Montana, and Alaska) provide a full minimum wage for tipped workers and asserted that these seven states have outperformed the 43 states without a full minimum wage for tipped workers.
  • She elaborated that these seven states have experienced greater restaurant establishment growth since the COVID-19 pandemic, greater restaurant employment growth, and greater wages (including tips).
• She stated that tipping remains “robust” within the seven states that provide a full minimum wage for tipped workers.
• She then asserted that the COVID-19 pandemic had worsened the disparity between states with a full minimum wage for tipped workers and states without a full minimum wage for tipped workers.
  • She noted how tipped workers during the COVID-19 pandemic had reported decreased tips, increased harassment, and an inability to qualify for unemployment insurance due to low wages.
  • She indicated that these worsening trends had caused 1.2 million restaurant workers to leave the restaurant industry.
• She highlighted how the aforementioned challenges stemming from the COVID-19 pandemic had caused thousands of U.S. restaurants to increase wages (while maintaining tip compensation) to recruit and retain staff.
• She remarked that the fact that tipped workers had left the restaurant industry during the COVID-19 pandemic due to low wages demonstrates the desire for tipped workers to make the full minimum wage.
  • She added that an increasing number of cities and states are now requiring tipped employees to be paid the full minimum wage in response to these trends.

Ms. Simone Barron (Full-Service Workers Alliance):

• She indicated that she has been a tipped worker in the full-service restaurant industry for 36 years and that she has been a tipped worker in Seattle, Washington for the previous 24 years.
• She noted how her state of Washington had eliminated its tip credit during the 1980s and recounted how she had made nearly $10 per hour plus tips when Seattle had passed its updated minimum wage law in 2014.
  • She indicated that Seattle’s current minimum wage rates are $19.97 per hour for the largest operators and $17.25 per hour for the smallest operators.
  • She added that these rates are set to increase to over $20 per hour for both large and small operators on January 1, 2025.
• She remarked that Seattle’s minimum wage increase is “devastating” the full-service industry, her job, and her income.
• She noted how Seattle is approaching its 11th consecutive minimum wage increase since its 2014 minimum wage law had gone into effect.
  • She highlighted how these minimum wage increases had not even stopped during the COVID-19 pandemic.
• She discussed how hundreds of Seattle restaurants had closed or moved out of the area since Seattle’s minimum wage increases had begun and stated that the remaining restaurants must change how they conduct business.
• She remarked that Seattle’s minimum wage increase coupled with the state’s lack of a tip credit has subjected restaurant workers (like herself) to surcharges, service charges, non-transparent payment models, eliminations of tip lines, eliminations of tipping, mandatory tip pooling to pay non-tipped workers, eliminations of support staff jobs, eliminations of hours and shifts, and losses of jobs due to restaurant closures.
  • She warned that Seattle’s looming minimum wage increase in January 2025 would result in more layoffs, rising costs, rising menu prices, and more restaurant closures.
• She asserted that Seattle’s policies are having a “devastating” impact on restaurant workers and stated that restaurant workers are losing the opportunity to maximize their incomes under a traditional tipping structure.
  • She commented that these policies are causing tipped workers to make closer to the minimum wage while increasing the cost of living for all Seattle residents.
• She stated that the elimination of hours at restaurant jobs is forcing restaurant workers to take on multiple jobs to survive financially.
  • She also commented that the elimination of restaurant jobs is causing more people to vie for increasingly fewer employment opportunities.
• She remarked that Seattle’s minimum wage increase has created instability for the city’s workers and asserted that the COVID-19 pandemic had exacerbated these challenges.
  • She testified that she had personally faced economic challenges since the COVID-19 pandemic and described Seattle’s current restaurant industry as unreliable, unsettled, and unbalanced.
• She further stated that Seattle’s minimum wage increases are harming the city’s non-tipped workers.
  • She mentioned how her friend works for a major produce provider that is pivoting to providing pre-prepped vegetables to restaurants that can no longer afford to employ prep cooks.
• She remarked that Seattle’s small business owners have described the city’s upcoming minimum wage increase as a “wipeout” and noted how this minimum wage increase will coincide with the expiration of the total compensation credit for the city’s smallest businesses.
  • She explained that these small businesses will be required to pay the same wages as the city’s largest employers.
• She mentioned how Seattle’s local restaurant industry leaders had recently held a town hall where they warned that the impending minimum wage increase would force menu prices to increase, pay structures to change, and business models to adapt.
  • She asserted that these changes will cause labor costs to be passed onto customers while restaurant workers face a potential elimination of tips and layoffs.
• She concluded that Seattle’s minimum wage increases are causing businesses to close and driving up the cost of living.

Witness Opening Statements:

Rep. Eric Burlison (R-MO):

• Rep. Burlison thanked Ms. Barron for sharing her personal experience as a tipped worker. He commented that it is likely demeaning to Ms. Barron for non-tipped workers to dispute Ms. Barron’s assessments of the current situation facing restaurant workers.
  • Ms. Barron called it “completely weird” for Ms. Jayaraman to speak on behalf of restaurant industry workers. She stated that Ms. Jayaraman is a labor activist who has not worked in the restaurant industry. She asserted that Ms. Jayaraman is not representing the views of restaurant workers. She testified that most of the people that she knows in the restaurant industry are unaware of Ms. Jayaraman.
• Rep. Burlison attributed that many of the criticisms of the U.S.’s tip credit system to a lack of understanding of “basic economics.” He commented that Ms. Barron is experiencing this landscape first-hand.
  • Ms. Barron remarked that she must endure the consequences stemming from tipped worker policies. She asserted that Seattle’s policies for tipped workers have “absolutely devastated” tipped workers (including herself). She also mentioned how her friends work in the restaurant industry and are experiencing significant hardships. She testified that her number of shifts as a restaurant server have been reduced because of Seattle’s impending minimum wage increase. She commented that her experience is not unique.
• Rep. Burlison stated that raising the minimum wage and eliminating the tip credit would result in reduced restaurant worker hours and staff, as well as higher costs.
  • Ms. Barron stated that restaurants will first reduce their support staff in response to higher costs. She noted how restaurant support staff jobs are entry-level jobs and disproportionately filled by people of color and immigrants.
• Rep. Burlison interjected to ask Ms. Barron to comment on current policy proposals seeking to eliminate taxes on tips.
  • Ms. Barron expressed general support for policy proposals seeking to eliminate taxes on tips. She stated that these policy proposals would result in greater take home pay for tipped workers.
• Rep. Burlison then asked Ms. Boucher to discuss his company’s regulatory compliance costs and how these costs impact his company’s restaurants.
  • Mr. Boucher remarked that proposed federal regulatory changes would force his company to reduce their staff and raise prices. He stated that his company seeks to make decisions that benefit their employees, their customers, and their business. He warned that proposed federal regulatory changes would harm his company’s employees, customers, and business. He elaborated that these changes would result in reduced numbers of employees and employee hours, worse customer service, and tighter profit margins.
• Rep. Burlison indicated that his question period time had expired.

Subcommittee Ranking Member Alma Adams (D-NC):

• Ranking Member Adams noted how Republican and Democratic administrations have different views regarding how tipped workers should be paid for time spent on activities that do not generate tips. She asked Ms. Jayaraman to explain the concept of side work.
  • Ms. Jayaraman mentioned that her organization represents 300,000 restaurant and service workers. She noted how 150,000 petitions from workers had been delivered to Congress calling for tipped workers to receive a full minimum wage (with tips supplementing this minimum wage). She stated that tipped workers are requesting to be paid a full minimum wage to address the rampant wage theft within the restaurant industry. She noted how the DoL has reported an 84 percent violation rate with regard to employers complying with the rules surrounding the two-tiered wage system. She asserted that side work is a major driver of these violations. She explained that side work refers to work obligations for tipped workers that do not generate tips. She indicated that this work may include rolling napkins and silverware, setting up tables, replacing condiments, and wiping glasses. She criticized the Trump administration for eliminating worker protections that prevented workers from earning a sub-minimum wage while engaged in side work. She asserted that the U.S. must ensure that tipped workers are only engaging in side work for 20 percent of their time (or less) so that these workers can generate sufficient tips for their earnings to meet full minimum wage.
• Ranking Member Adams asked Ms. Jayaraman to confirm that side work diverts workers from engaging in activities that generate tips.
  • Ms. Jayaraman confirmed that side work diverts workers from engaging in activities that generate tips.
• Ranking Member Adams asked Ms. Jayaraman to discuss the importance of the 80/20 rule for restaurant workers.
  • Ms. Jayaraman remarked that there exists a “very high” level of wage theft within the restaurant industry. She stated that the imposition of significant side work requirements on employees prevents these employees from making a full minimum wage. She noted how her organization’s surveys have found that 50 percent of tipped workers have reported challenges making a full minimum wage and their employers not covering the difference between their earnings and the minimum wage.
• Ranking Member Adams asked Ms. Jayaraman to discuss how the Trump administration had addressed the issue of side work compensation for restaurant workers.
  • Ms. Jayaraman remarked that the Trump administration’s first act was pushing to make tips the property of restaurant owners (rather than workers). She described this policy as the most egregious action that any administration has ever taken regarding tipped workers. She also stated that the Trump administration had removed protections for tipped workers that would have enabled these workers to earn a full minimum wage with tips. She commented that tipped workers cannot make a full minimum wage if they receive sub-minimum wages and have excessive side work obligations.
• Ranking Member Adams asked Ms. Jayaraman to respond to the argument that paying a full minimum wage to workers (while maintaining the ability of these workers to earn tips) would harm businesses and reduce tipping.
  • Ms. Jayaraman noted how seven states require that tipped workers receive a full minimum wage and the continued ability to receive tips. She remarked that these seven states have consistently experienced higher small business growth rates, higher job growth rates, and higher tipping averages than the 43 states without these laws. She added that these seven states had outperformed the 43 states without these laws during the COVID-19 pandemic. She further discussed how many localities (including Flagstaff, Arizona and Washington, DC) have passed full minimum wage policies for restaurants and indicated that these policies permit restaurant workers to still receive tips as supplementary income. She stated that these cities are experiencing restaurant, job, and wage growth.
• Ranking Member Adams further noted how Ms. Jayaraman’s testimony had linked the tip credit and the sub-minimum wage for tipped workers with discrimination and sexual harassment. She asked Ms. Jayaraman to explain how the tip credit contributes to these problems.
  • Ms. Jayaraman noted how two-thirds of tipped workers are female, which renders these workers vulnerable to harassment and inappropriate behavior from customers. She commented that these tipped workers depend upon tips for their financial survival. She noted how the restaurant industry has the highest rates of harassment among all industries.

Rep. Glenn Grothmann (R-WI):

• Rep. Grothmann remarked that much of the debate at the hearing implies that restaurant servers and bartenders are almost economically destitute. He stated however that his restaurant owner constituents have told him that their tipped employees are generating significant income from tips. He asked Mr. Boucher and Mr. DeCamp to indicate the amount of money tipped restaurant servers and bartenders are generally making. He also asked Mr. Boucher and Mr. DeCamp to estimate how much money these employees would make on a Friday night.
  • Mr. Boucher testified that his company’s servers earn between $20 per hour and $35 per hour when accounting for their hourly wages plus tips. He stated that his company often faces challenges promoting tipped employees into management positions because tipped employees can earn more money working on busy evenings than as managers.
• Rep. Grothmann mentioned how one of his restaurant owner constituents had recently told him that his company’s servers made more money than Mr. Boucher’s company’s servers.
  • Mr. DeCamp stated that the incomes of tipped restaurant servers and bartenders will depend heavily on the restaurant. He remarked however that these tipped employees are generally doing well financially. He also testified that the front of the house employees of his restaurant clients tend to make more money than the kitchen staff. He commented that prospective restaurant employees tend to want front of the house positions because these positions are the highest earnings positions. He disputed the assertion that tipped restaurant employees are facing economic destitution.
• Rep. Grothmann asked Mr. DeCamp to estimate the current hourly earnings of tipped restaurant workers.
  • Mr. DeCamp noted that the current economic data suggests that the average U.S. tipped restaurant employee is earning $15.51 per hour. He indicated that this figure encompasses both cash wages and tip earnings and accounts for all restaurant concepts.
• Rep. Grothmann commented that tipped restaurant workers are likely making more than $15.51 per hour. He noted how the National Restaurant Association had found that tipped workers earn a median wage that is nearly four times the current federal minimum wage. He asked Mr. Boucher to estimate the maximum potential wage that his company’s restaurant workers can make.
  • Mr. Boucher testified that his company has tipped workers that make between $75,000 and $100,000 annually.
• Rep. Grothmann remarked that tipped restaurant workers can make decent salaries at nicer and busier restaurants. He then asked Mr. Boucher to discuss the compliance burdens that restaurants would face if the 2021 Tip Regulations under the FLSA’s 30 continuous minute requirement were to be finalized.
  • Mr. Boucher remarked that it would be impossible for restaurants to track the time that their tipped workers spend on non-tipped tasks for compliance with the 30 continuous minute requirement. He stated that his company would need to hire dedicated employees to ensure that its restaurants are complying with this requirement. He further argued that these non-tipped tasks are part of the service that tipped workers provide to customers.
• Rep. Grothmann mentioned how one of his first jobs had been in the service industry. He then asked Mr. Boucher to discuss the amount of training that his company provides to its restaurant servers before the restaurant servers can wait tables.
  • Mr. Boucher testified that his company’s restaurant servers are trained between seven and ten shifts. He indicated that his company’s restaurant servers are paid minimum wage for these shifts.
• Rep. Grothmann highlighted how restaurant servers can begin fully receiving tips within two weeks of starting their jobs. He commented that this situation differs from other types of jobs that can require more extensive training (such as technical school education or apprenticeships).
  • Mr. Boucher confirmed Rep. Grothmann’s comments. He added that these restaurant servers can often obtain these positions without having any previous work experience.

Rep. Mark Takano (D-CA):

• Rep. Takano criticized the U.S.’s two-tiered minimum wage system created by the tip credit. He remarked that this system costs workers billions of dollars annually in wage theft. He also stated that employer violations of regulations designed to protect tipped workers occur at “alarmingly” high rates. He asserted that too many tipped workers in the U.S. are unable to make a sustainable living. He noted how approximately 5.1 percent of all U.S. workers live in poverty while the share of tipped workers living in poverty is 11.3 percent. He asked Ms. Jayaraman to discuss the role that the tip credit plays in pushing workers into poverty.
  • Ms. Jayaraman remarked that it is very difficult for people to live on a wage of $2.13 per hour plus tips. She commented that the income of tipped workers can be dependent on how customers perceive them and their tolerance for harassment. She noted how U.S. tipped workers are “overwhelmingly women” and disproportionately people of color. She also noted how tipped occupations have the highest rates of single mothers of all occupations. She emphasized how tipped workers often must tolerate inappropriate behavior from customers in order to make a living wage. She stated that tipped workers have more than twice the poverty rate of other workers because tips are unreliable. She noted however that other living expenses (such as rent and bills) do not fluctuate across time. She remarked that the instability of tips results in many tipped workers not making the full minimum wage. She indicated that 50 percent of tipped workers have reported regularly not making the full minimum wage. She stated that employers often fail to cover the difference between a tipped worker’s earnings and the minimum wage. She mentioned how the DoL had found an 84 percent violation rate of employer obligations under the tip credit system. She remarked that the combination of the sub-minimum wage, fluctuations in tipping amounts, and employer non-compliance with tip credit rules results in workers earning very low wages. She highlighted how tipped workers use food stamps at double the rate of other workers.
• Rep. Takano also stated that the U.S. tip credit system forces employers to be reliant upon customers to satisfy their federal minimum wage requirements. He emphasized that tipped employees often do not receive the full minimum wage. He then asked Ms. Jayaraman to confirm that tipped workers often must endure discrimination and harassment.
  • Ms. Jayaraman confirmed that tipped workers often must endure discrimination and harassment. She noted how University of Michigan Law Professor Catharine MacKinnon had asserted that the restaurant industry has the highest rate of sexual harassment of any industry. She attributed the restaurant industry’s high rate of sexual harassment to the fact that tipped workers must endure the biases and harassment of customers in order to obtain tips (which can heavily fluctuate). She also mentioned how Professor MacKinnon has concluded that the most effective way to address this sexual harassment in the restaurant industry is to provide tipped workers with a full minimum wage (with tips supplementing this income). She further stated that this harassment of tipped restaurant workers had gotten worse during the COVID-19 pandemic. She recounted how many restaurant patrons had requested that their female waiters remove their masks to judge their appearances.
• Rep. Takano expressed frustration that tipped workers are being subjected to rampant sexual harassment. He stated that the fact that these tipped workers do not receive the full minimum wage makes the workers especially vulnerable to harassment. He commented that these tipped workers have limited abilities to resist this harassment because resistance could cause the workers significant financial injury. He then asked Ms. Jayaraman to respond to the claims that tipped workers do not want a full minimum wage (with tips supplementing this income).
  • Ms. Jayaraman noted how 147,000 petitions from workers were delivered to Congress calling for tipped workers to receive a full minimum wage (with tips supplementing this minimum wage). She added that 1.2 million tipped workers had walked off of their jobs to protest their low wages.

Rep. Mary Miller (R-IL):

• Rep. Miller asked Mr. Boucher to address how the elimination of taxes on tips would help the tipped workers at his company’s restaurants.
  • Mr. Boucher described the policy proposals to eliminate taxes on tips as an ephemeral political issue and stated that he does not have an opinion on these policy proposals. He commented that interest in these policy proposals can largely be attributed to the upcoming 2024 U.S. elections.
• Rep. Miller commented that eliminating taxes on tips would help tipped workers.
  • Mr. Boucher remarked that while eliminating taxes on tips should help tipped workers, he commented that there remains uncertainty surrounding this policy proposal. He further stated that the U.S. would need to develop a new revenue source to offset the lost tax revenue from this policy if the policy were to be adopted.
• Rep. Miller then thanked Mr. Boucher for creating jobs through his company. She criticized federal agencies for imposing regulatory burdens on Mr. Boucher’s company (especially during the COVID-19 pandemic).

Full Committee Ranking Member Bobby Scott (D-VA):

• Ranking Member Scott asked Ms. Jayaraman to indicate whether she has research showing that eliminating the tip credit and eliminating the sub-minimum wage would not reduce tips and would not harm jobs and businesses.
  • Ms. Jayaraman answered affirmatively. She remarked that research indicates that the seven states that require tipped workers to receive a full minimum wage have the same or higher establishment growth rates, higher job growth rates, and higher tipping averages as compared to the 43 states without such requirements. She highlighted how a new report had found that this trend has accelerated since the COVID-19 pandemic.
• Ranking Member Scott asked Ms. Jayaraman to provide the research that she had referenced to the Subcommittee.
  • Ms. Jayaraman expressed her willingness to provide the research that she had referenced for the hearing’s record.
• Ranking Member Scott then asked Ms. Jayaraman to discuss how eliminating the tip credit would benefit tipped workers.
  • Ms. Jayaraman remarked that the states that require tipped workers to be paid a full minimum wage (with tips supplementing their income) are outperforming states without such requirements in terms of job and establishment growth. She stated that eliminating the tip credit would provide tipped workers with economic stability. She noted how tipped workers in states with the tip credit must rely upon fluctuating tips to achieve the minimum wage earnings level or higher. She highlighted how these tips can fluctuate across shifts. She remarked that these fluctuations in tips create economic stresses for workers. She stated that providing tipped workers with assurances that they will make certain wages will empower these workers to reject harassment. She highlighted how the states that require tipped workers to be paid a full minimum wage (with tips supplementing their incomes) have half the level of sexual harassment for these workers as compared to the states without such requirements.
• Ranking Member Scott then discussed how employers can impose significant side work obligations on their tipped employees. He commented that these obligations can become a form of wage theft. He asked Ms. Jayaraman to indicate whether there exist other types of wage theft schemes that employers can engage in.
  • Ms. Jayaraman remarked that employers often fail to make up the difference when their tipped workers do not make a full minimum wage during shifts. She also stated that restaurants will often put certain positions in tip pools (such as managers and non-tipped staff) that should not be in tip pools. She commented that these inappropriate arrangements reduce the amount of tips that tipped workers receive. She further stated that tipped workers are often forced to engage in work that does not generate tips while receiving a sub-minimum wage. She then discussed how Darden Restaurants (which is the U.S.’s largest employer of tipped workers) had previously expressed their intention to move all of their workers to earning a sub-minimum wage, regardless of the tasks of their workers. She asserted that the existence of a sub-minimum wage for tipped workers creates an incentive for employers to require their tipped workers to engage in side work. She stated that the U.S. therefore requires protections for workers earning a sub-minimum wage.
• Ranking Member Scott asked Ms. Jayaraman to indicate whether the current penalties for employers that violate tip credit rules are sufficient.
  • Ms. Jayaraman asserted that the current penalties for employers that violate tip credit rules are non-existent. She stated that employers will often contest these penalties for years and that employees will often not receive restitution until long after the violations have occurred. She commented that this lengthy process often causes employees to settle these cases and receive much less money than they are owed. She remarked that employers lack any real incentives to follow the law because they can delay payments of violations for a very long time.

Full Committee Chairman Virginia Foxx (R-NC):

• Chairman Foxx noted how critics of the tip credit system sometimes refer to the tip credit as a sub-minimum wage. She asked Ms. Barron to indicate whether it is fair to assert that tipped workers are earning a sub-minimum wage.
  • Ms. Barron remarked that the description of tipped workers earning a sub-minimum wage is unfair. She described the tip credit as a mutually beneficial economic tool that keeps restaurants sustainable, enables tipped workers to earn more than a minimum wage, and supports competitive wages for back of the house workers. She emphasized that she personally works as a tipped restaurant worker and supports the tip credit system.
• Chairman Foxx also mentioned how she had personally worked as a tipped restaurant worker during high school and college. She then asked Mr. Boucher to discuss the benefits of the tip credit and to address how the elimination of the tip credit would impact his company.
  • Mr. Boucher remarked that the tip credit empowers tipped employees to increase their earnings based on their level of provided service. He stated that eliminating the tip credit could create disincentives for tipped workers to provide optimal service. He also remarked that eliminating the tip credit would be economically “devastating” for his company.
• Chairman Foxx remarked that the ability of customers to tip employees enables customers to reward good service. She also commented that tips enable tipped employees to function as entrepreneurs. She then mentioned how the U.S. Court of Appeals for the Fifth Circuit had recently vacated the DoL’s 2021 Tip Regulations under the FLSA. She noted how this decision was the first time a federal court had scrutinized a DoL rule since the U.S. Supreme Court’s recent Loper Bright Enterprises v. Raimondo decision. She asked Mr. DeCamp to explain the U.S. Court of Appeals for the Fifth Circuit’s concerns regarding the DoL’s 2021 Tip Regulations under the FLSA.
  • Mr. DeCamp noted that the U.S. Court of Appeals for the Fifth Circuit had concluded that the DoL’s 2021 Tip Regulations under the FLSA were not based on the FLSA’s text. He discussed how the FLSA defines tipped employees in a specific way in reference to their occupation and their tips. He stated that the DoL had instead sought to define tipped employees based on their time sheets and tasks. He noted how the U.S. Court of Appeals for the Fifth Circuit had asserted that Congress had never authorized the DoL to “micromanage” restaurant work activities and that the FLSA is simply a minimum wage statute.
• Chairman Foxx remarked that the Biden administration has frequently exceeded its authorities and has failed to administer federal law in accordance with Congressional intent. She contended that federal court decisions have been necessary for ensuring that the Biden administration’s actions adhere to federal laws.

Subcommittee Chairman Kevin Kiley (R-CA):

• Chairman Kiley noted how Ms. Barron works as a tipped employee in a state that has eliminated the tip credit. He asked Ms. Barron to indicate whether her fellow tipped workers prefer the tip model.
  • Ms. Barron remarked that tipped workers prefer receiving tips over receiving a flat wage. She stated that tips provide these workers with the opportunity to maximize their incomes and make more than any employer is willing or able to pay.
• Chairman Kiley also noted how Ms. Barron’s testimony had asserted that the elimination of the tip credit has subjected tipped workers to surcharges, service changes, non-transparent pay models, eliminations of tip lines, and eliminations of tipping. He asked Ms. Barron to indicate whether federal bureaucrats are threatening the ability of tipped workers to receive tips.
  • Ms. Barron answered affirmatively. She specifically criticized the federal tip pooling rules that enable employers to take the tips of tipped workers and redistribute these tips to non-tipped workers. She stated that these rules provide an opportunity for wage theft and reduce earnings for tipped workers.
• Chairman Kiley remarked that federal bureaucrats are threatening the ability of tipped workers to receive tips. He then asked Mr. Boucher to address how the elimination of tipping has caused certain restaurants to close.
  • Mr. Boucher recounted how there were two New Hampshire restaurants that had adopted a flat wage for their employees. He indicated that these restaurants had told their customers that tipping was no longer expected. He noted how both of these restaurants had closed within a year of eliminating tips. He stated that the absence of tips caused the restaurant employees to not seek out high demand shifts because their wages would be the same across all shifts. He added that many of the employees took up tipped server positions at other restaurants during high demand shifts. He stated that these restaurants ultimately lost employees because their wages (which did not include tips) were uncompetitive.
• Chairman Kiley remarked that his state of California’s poor policies have forced restaurants to close and commented that these restaurant closures impact both employees and communities. He then asked Mr. DeCamp to confirm that tipped workers prefer tipping models according to surveys.
  • Mr. DeCamp stated that tipped workers prefer tipping models according to surveys. He noted that while workers would ideally want to earn a high base wage and tips, he commented that this option is not realistic. He stated that workers have thus exhibited an overwhelming preference for earning a sub-minimum wage and the ability to earn tips over a higher minimum wage. He indicated that 97 percent of tipped workers prefer the aforementioned tipping model.
• Chairman Kiley stated that the DoL’s policies toward tipped workers are very similar to the DoL’s policies toward independent contractors. He stated that the DoL is seeking to reduce the number of independent contractors in the U.S., even though most independent contractors prefer the independent contracting model over the standard employment model. He asked Mr. DeCamp to explain why the DoL is pursuing policies that do not account for the preferences of workers.
  • Mr. DeCamp remarked that the DoL’s policies are attributable to “bureaucratic arrogance.” He stated that while federal departments and agencies have previously expected that federal courts would permit all of their policies, he predicted that the U.S. Supreme Court’s recent Loper Bright Enterprises v. Raimondo decision would cause these departments and agencies to pursue policies that better adhere to Congressional intent moving forward.

Rep. Burgess Owens (R-UT):

• Rep. Owens asked Ms. Jayaraman to indicate how much time she had personally spent working as a tipped worker.
  • Ms. Jayaraman testified that her organization represents 300,000 tipped workers.
• Rep. Owens interjected to ask Ms. Jayaraman to indicate how much time she had personally spent working as a tipped worker.
  • Ms. Jayaraman testified that she has not worked as a tipped worker.
• Rep. Owens asked Ms. Jayaraman to indicate how much time she had personally spent owning a restaurant.
  • Ms. Jayaraman indicated that her organization had owned a restaurant for ten years.
• Rep. Owens asked Ms. Jayaraman to clarify whether she or her organization had owned the restaurant.
  • Ms. Jayaraman interjected to clarify that she had started an organization and that this organization had opened three restaurants.
• Rep. Owens asked Ms. Jayaraman to indicate whether she had personally opened these restaurants or whether her organization had opened these restaurants.
  • Ms. Jayaraman stated that she had opened these restaurants as the president of her organization.
• Rep. Owens stated that Ms. Jayaraman’s concept of restaurant ownership differs from that of the other witnesses.
  • Ms. Jayaraman interjected to dispute Rep. Owens’s statement. She mentioned how she had started her restaurants through her organization and had hired employees for these restaurants.
• Rep. Owens then remarked that Ms. Jayaraman’s account of current tipping policies differs heavily from Ms. Barron’s account of current tipping policies. He asked Ms. Jayaraman to indicate whether her income changes when restaurants leave her state of California due to the state’s tipping law.
  • Ms. Jayaraman disputed the premise underlying Rep. Owens’s question. She noted how California has had a full minimum wage for restaurant workers (with tips supplementing this minimum wage) for 50 years. She remarked that restaurants should therefore not have left the state in recent months due to the state’s long standing tip policies.
• Rep. Owens interjected to reclaim his time. He highlighted how California had recently increased its minimum wage to $20 per hour. He asserted that this minimum wage increase has caused restaurants to leave the state.
  • Ms. Jayaraman interjected to comment that the minimum wage is a separate issue from the tip credit.
• Rep. Owens interjected to remark that California’s recent minimum wage increase has caused many restaurants to leave the state and the loss of 10,000 jobs.
  • Ms. Jayaraman interjected to assert that none of these lost restaurant jobs involved tipped workers. She noted how the chief financial officer (CFO) of Denny’s (which is a large employer of tipped workers) has claimed that the restaurant chain is growing faster in California than in any other state because Denny’s restaurants pay their employees a full minimum wage in California.
• Rep. Owens interjected to reclaim his time and dispute Ms. Jayaraman’s assertions. He asserted that Ms. Jayaraman’s lack of direct experience within the restaurant industry undermines her ability to make policy recommendations on tipped worker policies.
  • Ms. Jayaraman remarked that she has 30 years of professional experience working with restaurant workers.
• Rep. Owens interjected to comment that the other witnesses at the hearing (who work in the restaurant industry) have very different views on tipped worker policies than Ms. Jayaraman.
  • Ms. Jayaraman interjected to state that restaurant workers can have differences of opinion. She asserted however that the “overwhelming majority” of restaurant workers are demanding to be paid more. She stated that it would be very difficult for a person to live on a sub-minimum wage and depend on tips for their livelihood.
• Rep. Owens interjected to reclaim his time. He highlighted how U.S. workers have the freedom to leave their industries and states. He asserted that restaurant workers are leaving California and Seattle, Washington due to their state and local tipping policies.
  • Ms. Jayaraman interjected to remark that California has the fastest and largest growing restaurant industry in the country.
• Rep. Owens remarked that “arrogant bureaucrats” are developing rules for the restaurant industry without practical experience. He criticized Ms. Jayaraman for disregarding the testimony of Ms. Barron who has first-hand experience working in the restaurant industry.
  • Ms. Jayaraman interjected to assert that the worst policy for tipped workers had been the Trump administration’s efforts to make tips the property of restaurant owners (rather than workers).
• Rep. Owens reiterated his criticism of Ms. Jayaraman for disregarding Ms. Barron’s testimony. He also asserted that the impacts of Ms. Jayaraman’s supported policies will not impact Ms. Jayaraman’s income. He remarked that California’s current regulatory policies are economically harming the state.
  • Ms. Jayaraman interjected to remark that California has the fastest and largest growing restaurant industry in the country according to the CFO of Denny’s.

Subcommittee Ranking Member Alma Adams (D-NC):

• Ranking Member Adams remarked that the current sub-minimum wage for tipped employees perpetuates low pay, enables “inexcusable” levels of wage theft, and leads to higher poverty rates. She stated that most tipped workers face income insecurity and limited or no access to benefits. She remarked that the Trump administration’s policies had only worsened these issues by allowing employers to steal almost $6 billion annually from their tipped employees. She applauded the Biden administration for withdrawing the Trump administration’s tipping policies and for working to ensure that workers receive their generated tips. She asserted that Subcommittee Republicans are pursuing policies that would weaken protections for tipped workers and enable unscrupulous employers to engage in illegal activities. She stated that Subcommittee Democrats are seeking to empower tipped workers through advancing the Raise the Wage Act of 2023 and the LET’S Protect Workers. She called on the Subcommittee to work together on developing an employment system that supports all workers and addresses the aforementioned issues.

Subcommittee Chairman Kevin Kiley (R-CA):

• Chairman Kiley discussed how millions of Americans rely upon tips for their livelihoods and appreciate the opportunity to earn tips. He criticized the DoL for pursuing policies that would prevent these workers from earning tips. He mentioned how federal legislation has been introduced that would exempt tips from federal taxation. He also asserted that the DoL’s current tipping policies threaten the viability of many restaurants. He then mentioned how current Acting U.S. Secretary of Labor Julie Su had previously served as the Secretary of the California Labor and Workforce Development Agency. He noted how California had experienced the U.S.’s highest unemployment rate, the U.S.’s lowest level of wage growth, and the U.S.’s highest poverty rate during Ms. Su’s tenure as Secretary of the California Labor and Workforce Development Agency. He stated that Ms. Su’s record in California was so poor that the U.S. Senate has refused to confirm Ms. Su to become U.S. Secretary of Labor. He criticized Ms. Su’s prolonged status as Acting U.S. Secretary of Labor and emphasized that the U.S. Senate has refused to hold a confirmation vote for Ms. Su. He then remarked that the DoL is pursuing policies related to tipped workers and independent contractors that are not in accordance with the wishes of the workers that they purport to benefit. He praised the Committee for its efforts to combat these Biden administration policies. He applauded the U.S. Court of Appeals for the Fifth Circuit’s recent ruling that struck down the 2021 Tip Regulations under the FLSA. He also mentioned how there are currently legal challenges underway to the DoL’s independent contractor rule. He expressed the intention of Committee Republicans to continue working to protect workers and small businesses.