Tipping will likely always remain a heated topic. On one side, servers and bartenders clearly rely on tips to increase their take-home pay beyond the tipped minimum wage. Few people would argue against their perspective, although consumers are increasingly wary of seeing tip buttons pop up everywhere, even in the most nontraditional circumstances.
Additionally, unions love to make tipping an organizing issue since it’s a relatively low-stakes “win,” as we’ve seen with Starbucks, Burgerville, and Casa Bonita. And tipping has grown more controversial after a fast-food giant argued for abolishing tipped wages, as we’ll discuss below.
If that wasn’t enough, federal regulations on tipping are about to change, so employers will want to know what’s coming.
A Tipping Policy Sparks a Union Drive:
Servers at BJ’s Restaurant & Brewhouse in Modesto protested a new policy that requires them to share 4% of each ticket, even when customers don’t tip. These workers say that they are now taking home 20% less in pay and are attempting to form the first union in the restaurant’s history.
They seek to join the independent BJ’s Modesto Servers and Bartenders Union, which won’t be formally affiliated with any particular union but is receiving vocal support from the North Valley Labor Federation partnership of unions scattered throughout the region.
McDonald’s Breaks with the Industry:
McDonald’s CEO Chris Kempczinski recently took a bold position while denouncing the tipped wage model, and the company feels so strongly on the subject that they exited a trade group.
As Kempczinski argued to CNBC, McDonald’s believes that the tipped wage model contributes to “an uneven playing field” against fast-food and fast-casual restaurants, which shoulder higher labor costs while full-service joints are allowed to shift part of that burden to customers. Kempczinski proposed that every restaurant should be required to pay all employees minimum wage (currently $7.25 per hour versus the $2.13 tipped wage).
Kempczinski’s position appears rooted in frustration with tipping as a business model that arguably gives some restaurants the competitive edge on the way to profitability. Further, McDonald’s trade-group departure will likely cause future ripples within the food service industry.
Upcoming Federal Changes:
The Department of Labor has long held a complex set of regulations for employers to follow for tipped employees. Those rules are about to change with President Trump’s “big beautiful bill” including “no tax on tips,” meaning that eligible workers who gather “qualified tips” can claim up to a $25,000 deduction if they are under the $150,000 annual earning limit.
Who is eligible for the deduction? According to the U.S. Treasury, some jobs will be excluded, but the list of inclusions is a whopper with 68 jobs such as baristas, entertainers, hospitality workers, nannies, tutors, tattoo artists, pet sitters, and many more. Naturally, full-service restaurant workers sit at the top of the list, so McDonald’s can’t be thrilled, but one guarantee is this: The conversation on tipping will be ongoing.
