The only real beneficiary of the preposterously complicated tip credit is lawyers. Imagine what it's like for a company running restaurants in multiple states. There's no tip credit in some states, like California and Washington, where tipped employees must be paid the full minimum wage. Hawaii allows the tip credit only if the combined tip and cash wage surpass the statewide minimum hourly wage by 50 cents. New York and Connecticut have different minimum wages for servers, hotel employees, and bartenders.
Then you have to consider time that employees spend on activities not likely to yield tips. Applebee's, for example, has suffered a series of legal setbacks in lawsuits brought by tipped employees seeking back pay for time spent cleaning toilets and washing glassware.
The laws regarding tip sharing and tip pooling, which occur in virtually every restaurant, are even more complicated. Federal law allows mandatory tip sharing, but only among employees who customarily receive either direct or indirect tips. That means servers, bussers, food runners and hosts and hostesses can be required to pool their tips with each other, but not with managers. Unfortunately, the line between service and management is fuzzy in many restaurants, and differences between state laws further complicate matters. A California judge ordered Starbucks to pay $105 million in 2008 for forcing 100,000 baristas to share tips with supervisors. Last week, the New York Court of Appeals reached the opposite conclusion, ruling that New York law allows the arrangement. Chili's has also lost a multimillion dollar judgment over tip sharing.
The entire mess is begging for some certainty and predictability. Restaurants need a clear set of rules to follow. Servers should have a steadier income stream. Hosts and bussers, who have relatively little interaction with customers, ought not to be involved in tipping at all. Customers need more clarity as well, instead of worrying at the end of a meal if the waiter, or your guests, approve of your 17 percent tip.