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When Race Affects Tips, Do Employees Have Recourse?

by Linda Holmes, J.D.
April 15, 2008

There’s nothing more annoying than a study pointing out that we’re not as rational as we think we are. It’s so much easier not to know.
Consider tipping in restaurants. You tip your server based on friendliness, good service and the peculiar power with which human kindness courses through you at that moment, right? You round up, you round down, but those are supposed to be the principles at work.

When Race Affects Tips, Do Employees Have Recourse?Unfortunately, a recent study by tipping expert Michael Lynn in the Journal of Applied Social Psychology suggests that servers receive substantially different tips depending on a less logical but depressingly familiar factor: race. Specifically, whether the customers are white or black, black servers receive substantially lower tips than white servers in the same restaurant working the same shift.

You might, however reluctantly, wonder whether the black servers, at least in this study in this restaurant, provided inferior service compared to their white counterparts. But quality doesn’t seem to be the issue. Black servers whose service was rated a perfect five on a scale of one to five were tipped 16.6 percent of the bill, while white servers with the same rating were tipped 23.4 percent of the bill. In short, a black server doing what the customer perceived as a perfect job was generally tipped nearly 30 percent less than a white server doing the same.

Of course, tipping is not among our most sensible economic transactions to begin with. It has become an often capricious supplement to low wages rather than a carefully considered response to the quality of the service received. It’s an odd place to look for fairness.

But racial disparities create an entirely different level of concern. As Lynn notes, not only is the disparity he found problematic from the perspectives of logic, fairness and social justice, but it’s legally problematic, too. If this research is right, black servers are receiving less pay than white ones for doing the same work. Generally speaking, under Title VII of the Civil Rights Act, it’s illegal for an employer to “discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment because of such individual’s race.” But the employer, of course, isn’t providing the tips. The discriminating party is the customer. We aren’t monitored, we aren’t regulated and we can’t be sued.

Of course, while tips aren’t paid by the employer, they’re woven into the economics and legalities of running a restaurant. Under federal law and in most states, an employer can pay an employee less than minimum wage if the employee also gets tips. In fact, unless state law requires otherwise, an employer can pay a tipped employee as little as $2.13 per hour. The business isn’t handing out the tips, but it’s reaping a substantial benefit from the fact that they exist.

The irony of holding restaurants liable in this case is that the law historically has kept employers’ hands as far from tip transactions as possible providing that a tip belongs to the employee who receives it. Employers have to tread very carefully when they get involved in the distribution of tips — just ask Starbucks, currently under attack for sharing tip-jar money with shift supervisors. We’ve insulated the tip transaction from scrutiny or employer involvement in an effort to protect employees from employers’ grubby fingers. This lack of scrutiny, however, has resulted in unfavorable working conditions by allowing customer prejudices to affect employee compensation.

A Civil Rights Act challenge to allowing compensation through tips — a practice under the employer’s control, even if the individual tips are not — seems inevitable. When it comes, it may force an uncomfortable conversation about whether, at least for the time being, customers are so likely to discriminate in tipping that an employer can’t legally leave it entirely in our hands.

Linda Holmes is a freelance writer in Brooklyn, N.Y. She previously practiced law in Minnesota, specializing in employment law and legislative drafting.

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