How generous of a tip would you give your favorite restaurant server this holiday season if you knew the money could be pocketed by the restaurant owner?

Critics say such a scenario is a possible outcome of a controversial new Department of Labor proposal that loosens the rules governing pooled tips in two critical ways. First, the proposal would allow restaurants to distribute “pooled tips” to a much wider group of workers, including cooks, dishwashers, bussers and janitors--as long as waitstaff earns the current minimum wage of $7.25 per hour.

Next, the rule rescinds a number of waitstaff protections, including lifting their ownership of tip money. In effect, critics say, restaurant owners will be able to keep any pooled tips above a waitstaff’s minimum wage.

Watchdog groups such as the Economic Policy Institute said that without any additional requirements, the proposal will be an invitation to restaurant owners to pocket tip money.

“Make no mistake, as a result of this rule, workers will take home less and their loss will be employers’ gain,” said Heidi Shierholz, EPI senior economist and director of polic.

The DOL said in its proposed rule that it is tracking state and federal legal decisions in its “proposed removal of the regulatory limitation on an employer’s ability to utilize tips if it pays a direct wage of at least the full FLSA minimum wage.”

The agency also said the proposal “will allow for employers to provide in their agreements with employees for tip sharing among a larger tip pool of employees. This change could result, for example, in tips being shared with employees who are not customarily and regularly tipped, such as back-of-the-house employees in restaurants.”

Recent EPI research found that the total wages stolen from workers due to minimum wage violations exceeds $15 billion each year, with workers in restaurants and bars much more likely to suffer minimum wage violations than workers in other industries.

The DOL proposal may actually be tracking what some restaurant owners are already doing.

One waitress in Myrtle Beach, S.C., who spoke to Financial Advisor Magazine anonymously because of her employment situation, said she specifically chose to waitress at a smaller, mom-and pop-owned restaurant because the large seafood restaurants in the tourist town “pool” and distribute tips so widely that she felt she wouldn’t make enough money, she said.

Recently, however, the waitress said, the owner of the small restaurant where she has worked for the past 20 months has begun to keep tips that patrons paid waitstaff on credit and debit cards. While ostensibly pooling the tips, the owner is using the tip money to pay rent, tax and utilities bills, the waitress said. When asked why she didn’t report the practice to the South Carolina Department of Labor, she said she didn’t want to risk losing her job. She said she believes she does earn minimum wage for the hours she works most weeks, but earns “less during winter, when business is slow.”

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