Need Legal Help? Call Now!
1-800-991-6504
Business Legal News
Joe’s Crab Shack and the Tipping Debate

It seems that in the last few years, there has been an increased use of what I am now terming “no tip shaming.” You have probably seen at least one of the stories:

There are a ton more of other stories where these come from too. And this issue sparks a debate.

Should people tip their waitresses no matter what or should tips be dependent on good service? And even if it is dependent on good service, who is the judge of that?

A mistake in the kitchen, entirely not the server’s fault, could easily be attributed to the server by the diners when it comes time to leave the tip. A customer in a bad mood might be more inclined to take everything a server says out of context.

In other words, who is to say when a server is giving bad service and when a patron is just being rude?

The Legal Considerations

As far as the law is concerned, tipping is expected. That’s why servers are generally not required to make minimum wage. Tip credit laws allow establishments to pay lower than normally legal wages to workers who are likely to be tipped with the assumption that tips will make up the difference.

This means that when you don’t tip, servers might literally be taking home less than minimum wages for the day. Now, take the whole minimum wage debate in general.

If people are fighting for a higher minimum wage because the current rate does not establish a livable wage, imagine taking home even less than that at the end of the day. No matter how you feel about raising the minimum wage, after spending the day on your feet, being yelled at by customers, you might want to be making at least that rate. Right?

So should tip credit laws be evaluated in light of these tipping horror stories?

Joe’s Crab Shack

While the laws themselves might not be changing yet, there are several establishments that are taking change into their own hands by eliminating tipping and raising the hourly rate of their workers.

Of these establishments, Joe’s Crab Shack is getting the most attention as the first national chain to try something of this nature out. The chain is testing out a policy at 18 of its 130 locations where workers will make around $12-$14 but where customers will be told to please not tip.

Let’s look at this in context. Before this new policy, the workers were making the federal minimum wage for tipped workers, which is $2.13. So we are talking about a $10 plus raise per hour. That can make a huge difference in the lives of these workers, assuming they weren’t already pulling that in with the customers that do tip.

To cover the higher costs in wages, the menu prices themselves will go up. In other words, your meals aren’t suddenly going to be cheaper. You are tipping just by buying the food.

This seems like a good solution because assuming guests were planning on tipping anyway, and they should be, then their meals should roughly be the same price – perhaps if they are a good tipper, it will actually make meals cheaper; the wait staff is guaranteed to go home with the right amount of pay; and the restaurant isn’t suffering with the raises since they are making up the money in the increased menu prices.

It all seems perfect. So what could be the problem?

A Look at Europe

Of course, some people say that the downside of this solution is that it takes away the need to provide good service.

If these workers are no longer working for tips, will they stop caring? Why should they hurry over to refill your drink if they are getting paid the same amount either way?

To back up these fears, we all have heard plenty of horror stories from a friend of a friend who has travelled to Europe, or any other part of the world where tipping is not customary, and received poor service.

“So we had to wait an hour to be seated even though there were clearly empty tables because the servers didn’t want to have to deal with us.”

“And then they messed up our order multiple times because they didn’t feel the need to write it down.”

“Then she yelled at me when I asked her if I could get the burger without the onions.”

Whatever version of this you have heard – or even experienced yourself – it may make you question just how wise it would be for us to implement similar situations here by requiring restaurants to legally pay working wages in lieu of tip credits.

So what we want to know before we start doing anything drastic is to find out just how true (or untrue) these stories are. Will service really go down if wages go up?

Case Studies

Many people would tell you no. In fact, there are some case studies that suggest the opposite. Think of your servers as any other type of non-tipped worker: the cashier at your local grocery store, the cooks at those same restaurants where your servers are, or any other service professional. They all do their jobs because they want to continue being employed, especially when they are working for an employer who is paying them a fair wage.

And there have been companies that have tried this in the past. For example, Slate ran an article a few years ago where a restaurant owner talked about their history with a no-tipping policy.

In it, the author points out that when they stopped allowing tipping, service got better all around. This was because they could pay all their workers more equally – since they were not allowed to share tips with their cooking staff at the time under applicable California law, there servers ended up making more overall than the chefs. It was also because the servers were actually taking home more overall at the end of the day, and that made them work hard to keep their jobs.

Just like an office worker does not need someone standing over them, ready to pay them based off of how well they did their jobs in order to do their job right, people who follow this theory say that a server would be just as inclined to get their job done without needing a tip as a reward at the end.

And when it is stated that way, it does seem to make sense. But then, what about all those stories about Europe? Have they all been made up?

Another Look at Europe

I think we can safely establish two things here right up front.

  1. Many places in Europe don’t expect tipping.
  2. Many places in Europe have a reputation for…I’ll just say service that is culturally different than our service and thus service that is perceived as cold or unfriendly to our own expectations. (How is that for being PC?)

But saying that these two statements are one and the same is a false fallacy along the lines of saying “Stevie Wonder is blind. Love is blind. Stevie Wonder must be love.” Or however that saying goes. It could turn out that they are two completely independent statements.

Here is the thing we have to remember: there are cultural differences at play between the USA and the rest of the world. We can’t just associate our perceptions of their service with their lack of tipping expectations. Just maybe, we have to be aware that the tipping might not have anything to do with it.

The Solution

Don’t take what I just said as an opinion. I am not saying that tipping should be eradicated. I don’t know if it should or not. I think only time will tell that.

What I am saying is that we cannot equate or own horror stories with tipping in general. It could turn out that there is a direct correlation between tips and good service. Maybe Joe’s Crab Shack’s experiment will teach us all that tipping needs to be a requirement if we want customers to be treated well. However, right now, we might not have enough data to determine this one way or the other. We are at least equally likely to find out that people can and will do their jobs, tips or not.

In the end, what we can say is that only time will tell. As Joe’s and other establishments test out this new method for paying staff, we will see just what happens to service at these places.

Final Thoughts on Tipping

If these tests do go well, maybe a few years from now we will be able to see a complete overhaul in our tipping laws, and we will see service employees included in the minimum wage rate.

Either way, though, the tipping situation will likely see some modifications as minimum wages are raised and more ‘tip shaming’ stories go viral. However you feel about tipping, it is important that you keep up with these stories and developments if you employ workers who fall under tip credit laws.

Times are changing, and how you pay these workers might eventually need to change to.

Ashley Shaw

Post by:

Ashley Shaw is an experienced Legal Writer with years of experience. After receiving her JD, she worked for years in a corporate environment writing on business and employment law topics

Protect Your Business with a Dedicated Legal Team

Learn more about our General Counsel Services.

Pasha Law provides comprehensive legal protection for businesses by acting as general counsel for a fixed monthly fee. We do, of course, also provide flat fee legal services for limited scope projects.

Whatever your business legal needs, including contract drafting or negotiation, human resource advice, intellectual property protection, or even government compliance, Pasha Law has you covered from a legal and common sense business perspective.

Pasha Law Map

Serving business in the states of California, Illinois, New York, and Texas, we pride ourselves on digging deep into the business of our clients so we can proactively address their needs. Pasha Law focuses on striking the right balance between conservative advice and practical solutions.

Contact Our Firm to Learn More

Listen to our Podcast!

Legally Sound
Smart Business
A podcast covering business in the news with a legal twist by Pasha Law PC
Legally Sound Smart Business Logo
Pasha Law Microphone
Pasha Law Microphone
X