No-Tip Restaurants: Overview

Introduction

Long the subject of intense debate, the topic of tipping in restaurants came to the forefront in the first decades of the twenty-first century as a number of restaurant owners in the United States introduced restaurants that eschewed traditional tipping practices. Such no-tip restaurants typically eliminate tipping in favor of paying waitstaff higher wages, financed through either a set service charge or increased meal prices overall. The intent of such measures is to reduce pay disparities among different members of a restaurant's staff, bringing a greater sense of equality to the workplace, as well as to lessen servers' reliance on tips and improve service overall. Proponents of no-tip restaurants have argued that such venues succeed in meeting these goals, creating a more egalitarian workplace. Opponents of no-tip restaurants, however, have argued that both customers and waitstaff prefer existing tip arrangements, as they allow members of the waitstaff to make more money than a standard hourly wage would provide and enable customers to reward good service or register their disapproval of poor service. As such, opponents of no-tip restaurants believe that existing tipping practices ultimately benefit restaurant owners, employees, and customers, and should not be changed.

Understanding the Discussion

Fair Labor Standards Act (FLSA): A 1938 law that established the federal minimum wage.

Minimum wage: The lowest hourly wage an employer is legally allowed to pay employees in return for their labor.

Tip: An amount of money given to a worker such as a restaurant server, typically in reward for good service; also known as a "gratuity."

Tipped minimum wage: The minimum wage for workers whose income is based primarily on tips.

Tip pooling: The process of contributing a portion of tips one has received to a pool that is then split by the staff members who do not receive tips.

History

The subject of tipping has been a matter of significant debate in the United States since the mid-nineteenth century, when the concept was brought to the country from Europe. It was initially regarded by many Americans as an undemocratic and fundamentally un-American practice; some nineteenth-century Americans argued that it perpetuated class disparities and harkened back to an aristocratic society at odds with the United States' ostensible devotion to equality. This disdain for tipping extended to tipping in restaurants as well as tipping in other industries, such as transportation and hospitality. In the early twentieth century, some US states banned the practice altogether. However, tipping in restaurants increased in popularity over the decades that followed and, by the 1940s, had become firmly entrenched in American society. Some Americans continued to oppose the practice, with activists arguing that tipping not only placed the burden of paying waitstaff on customers rather than on restaurant owners, but also at times subjected both servers and customers to mistreatment based on gender, race, age, or other demographics. For the majority of Americans, however, tipping became an accepted part of life, and the topic of great debate became not whether one should tip but how much.

With tipping of restaurant waitstaff an accepted practice, the federal and state governments sought to develop laws to govern it. The payment of tipped employees, including restaurant staff as well as other workers, is subject to a wide array of legislation at the state, federal, and local levels. Perhaps the most significant is the Fair Labor Standards Act (FLSA), a federal law enacted in 1938, which established the federal minimum wage. The law specified that all workers covered under the law could not be paid less than the hourly amount set as the federal minimum wage; however, states and localities could opt to set higher minimum wages. The FLSA was amended in 1966 to add a provision known as the "tip credit" that applies specifically to tipped workers. Under that legislation, tipped workers must be paid the federal minimum wage, but a portion of that amount may come from tips rather than their employers. Employers need only pay the tipped minimum wage—by the mid-2020s, $2.13 per hour, according to the US Department of Labor—so long as the employee's hourly tips make up the difference between the tipped minimum wage and the federal minimum wage. If the employee's tips do not make up the difference, the employer must increase the worker's hourly pay to reach the federal minimum. Some states have introduced higher minimum wages for tipped employees, while others, such as California, require employers to pay tipped workers the same minimum wage as workers who are not tipped. The guidelines regarding who qualifies as a tipped employee for wage purposes also vary from state to state, although the federal definition is an employee who makes more than $30 in tips per month.

Since the popularization of tipping in American restaurants, various activists, politicians, and members of the restaurant industry have identified significant challenges within the tipping system, perhaps most notably the fact that the tipping process often results in a disparity in pay between the waitstaff and other restaurant employees. Although other restaurant employees are generally paid higher base wages than their waitstaff counterparts, servers have the potential to make significantly more money through tips, such as when a restaurant experiences a particularly high volume of customers. The other employees, however, are not similarly compensated for their increased amount of work in such situations. To address this perceived disparity, some restaurants have implemented the practice of tip pooling, in which all servers contribute a portion of their tips into a pool that is then split by certain other employees. The specific employees legally allowed to benefit from tip pooling varies, and some states even prohibit the practice of tip pooling altogether.

The issue of restaurant tipping practices gained additional significance in the first decades of the twenty-first century, as debates about the minimum wage and income disparities among American workers in general picked up steam among politicians, activists, and the public. To address such issues in the restaurant industry, a number of restaurateurs have experimented with a variety of strategies aimed at offering more equitable pay to restaurant staff by eliminating tipping. These strategies have taken several different forms. Some restaurant owners have opted to increase the prices of their meals to fund higher hourly wages for their staff members, which include servers as well as cooks and support staff. Other restaurateurs have implemented a set service charge based on a percentage of the total bill. The latter strategy, which is similar to a mandatory gratuity in execution, allows restaurant owners who have transitioned from a standard tipping arrangement to a no-tip restaurant to keep menu prices the same and decrease their chance of alienating existing customers. Some no-tip restaurants still permit their waitstaff to receive tips if they are offered, although tipping is not encouraged; others have policies in place mandating that tips be donated to charity. In 2015, both the decision of famous restaurateur Danny Meyer to ban tipping in all thirteen of his establishments in New York City and that of Joe's Crab Shack to eliminate tipping in eighteen of its locations—the first major restaurant chain to do so—particularly fueled the debate.

Several commentators noted that by the end of the 2010s, any increased momentum behind the implementation of no-tipping policies in restaurants had slowed down and even stalled. With restaurateurs citing customer complaints about menu pricing as one of the biggest reasons, several restaurants that had officially or experimentally put no-tipping policies in place at their establishments had returned to tipping. Others went back and forth, including at different eateries within their restaurant group. While well-known New York chef David Chang had emphatically publicized that his new restaurant Momofuku Nishi was a no-tip restaurant from the beginning upon its opening in 2016, by later that year he had instead introduced tipping. The number of Joe's Crab Shacks operating under a no-tip policy also shrank that year. In 2018, however, Chang then eliminated tipping at his well-established restaurant Momofuku Ko.

No-Tip Restaurants Today

Another change in the no-tip restaurant movement came with the onset of the COVID-19 pandemic in early 2020. Like many other industries, restaurants, especially those focused on dining in, experienced negative pandemic impacts. These included loss of patronage, staff shortages, and rises in operating costs due to virus control measures like isolation and social distancing as well as supply-chain disruptions. As public places such as restaurants began allowing people back in and the spread of the pandemic had slowed by around 2023, many in the restaurant industry who had not closed their doors had been forced to continue rethinking their operating approaches. Discussions and decisions around tipping came to the fore once more. Meyer, for example, had reinstated tipping at his establishments later in 2020 while emphasizing that plans were in place for using tip sharing to maintain more equitable compensation among workers. While Momofuku Ko announced the end of its no-tip policy in 2022, arguing that the tipping system would better enable the restaurant to attract and retain staff, some restaurants opened with or switched to no-tip policies as a way to address the restaurant labor shortage.

Responses to such efforts have been mixed. Some restaurant customers prefer to be able to choose whether to tip and how much and thus do not agree with the concept of no-tip restaurants, while others approve of efforts to address pay disparities in the industry. Servers are also split on the issue, with some arguing that eliminating tipping would limit their potential income. Amid efforts to address the issue of tipping and income inequality within the restaurant industry, there have also been efforts beyond it, with lawmakers in various states seeking to raise the minimum wage for tipped workers and reform legislation related to tip pooling. As views about tipping culture and etiquette in general continued to evolve, particularly amid inflation and increased customer expressions of tipping fatigue in the early 2020s, a 2023 Pew Research Center poll indicated that 57 percent of Americans would tip 15 percent or less for an average meal at a sit-down restaurant, 2 percent would not leave any tip, and 25 percent would leave 20 percent or more.

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