Where Tips End and Wages Begin

One year ago, this blog featured a post that outlined various reasons why the restaurant industry’s use of tips in lieu of guaranteed wages had come to provoke, in the author’s words, “a firestorm of criticism”: that reliance on tips as a significant component of server take-home pay 1) destined many servers to earning a sub-minimum wage; 2) encouraged female servers to tolerate sexual harassment by their customers; and 3) resulted in pay discrimination unrelated to the quality of servers’ work, a consequence of customer biases and their impacts on the amounts tipped.

Since the post’s publication, this firestorm has continued unabated. In fact, Uber even pointed to customer bias as a reason not to add a tipping function to its ride-sharing app, as its competitor Lyft has done. Moreover, recent modeling by FiveThirtyEight illustrates the volatility of tip-based incomes in the restaurant industry, as well as divisions between different classes of restaurants vis-à-vis the tipped amounts that their servers typically earn, which further underscores the question whether tipping can serve as a reliable substitute for set pay.

In this vein, a recent opinion out of the U.S. Court of Appeals for the Tenth Circuit sheds new light on the shortcomings of tipping as a reliable form of compensation, highlighting the dangers posed to employees by the liminal space between “tips” and “wages” under the Fair Labor Standards Act (FLSA).

Continue reading

Educating America’s Twenty-First Century Workforce

The nature of work in America is changing, with increasingly sophisticated automation, advanced digital platforms, and other technological innovations serving as a catalyst.  And these transformations are only adding to the challenges facing the American labor force and its readiness to succeed at work, especially younger workers who are relying on their secondary educations to jump-start their careers.  In a survey released by Achieve in 2005, employers estimated that about 39 percent of high school graduates were unprepared to meet entry-level job expectations, and the same percentage of recent graduates in the labor market found “gaps” in their workforce preparation.  Even more notable, employers in the same survey estimated that about 45 percent of recent graduates in the workforce were not prepared to advance in their companies beyond entry-level positions, a problem that at the time resulted in millions of job openings that companies are unable to fill with the right people.  A similar 2011 study by researchers at Johns Hopkins University and the University of Arizona found similar results, with about 40 percent of high school graduates unprepared for career training.

And these numbers could become even more stark as technology continues to impact the labor landscape, leaving millions of Americans without the skills necessary to secure and maintain employment.  For instance, technological advancements will increasingly polarize “labor-market opportunities between high- and low-skill jobs, unemployment and underemployment (especially among young people), and stagnating incomes for a large share of households.”  Moreover, while automation “brings the promise of higher productivity, increased efficiencies, safety, and convenience,” it also carries the danger — continually increasing as robotics and artificial intelligence advances — of job displacement and depressed wages.

Continue reading

The Role of the Labor Market in the Trump Travel Ban Litigation

Among the executive orders and presidential memoranda issued by the Trump White House during its inaugural weeks in power, the order titled “Protecting the Nation from Foreign Terrorist Entry into the United States” — colloquially known as the “travel ban” or “Muslim ban” — stands out for the degree of political and legal fire that it has drawn.

Issued on January 27, the travel ban immediately barred citizens from seven Muslim-majority countries from entering the U.S. for 90 days, purportedly to provide the Department of Homeland Security with time to review immigrant vetting procedures.  It also imposed restrictions on refugee entry into the U.S.

Of the dozens of lawsuits filed against the travel ban, the challenge brought by Washington and Minnesota — Washington v. Trump — has gone furthest toward striking it down.  On February 3, the Seattle-based federal district court judge hearing the lawsuit issued a nationwide temporary restraining order (TRO) against the ban’s enforcement, a decision upheld by a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit.  In response to the panel’s decision, the Trump Administration is currently revising the ban.

Despite national interest in the travel ban’s legality, however, the news coverage and online commentary about Washington v. Trump have largely overlooked a key feature of the states’ case: the travel ban’s purported effects on their labor markets as the bases for their injuries.

Continue reading