Before the coronavirus, millions of workers in the U.S. made their living off tips in restaurants, bars, coffee shops, beauty salons, massage parlors and countless other service-oriented businesses. Now some of those workers who lost their jobs during the lockdowns that followed the pandemic are finding they don’t qualify for unemployment benefits because — despite working full-time — they don’t earn enough.
Sarah May, a 14-year food service veteran, recently found this out the hard way when the bar where she worked in White Lake, Michigan, closed its doors in March. She promptly applied for jobless aid, but her claim was denied.
After getting a representative from the state’s unemployment office on the phone, May was told she made too little to qualify for benefits. Michigan requires a worker to show at least $3,744 in a quarter to qualify for unemployment benefits. May, who estimates her hourly wages at around $4, fell short by about $171, she said.
A worker who was making Michigan’s minimum wage of $9.65 could have reached the minimum by working just over 30 hours a week. But tipped workers in Michigan can be paid as little at $3.67 an hour, meaning they would need to work more than twice as many hours to make the cutoff to collect unemployment insurance.
“We have great customers, and I make good money in tips,” May said. But she added, “I live shift to shift. The tips I get, I know I can be guaranteed to get around a specific amount. And so I know what I can spend until my next shift. And now it was just gone, with no planning.”
A nationwide problem
Employers are required to report their workers’ tips as part of their earnings for income tax purposes as well as for unemployment insurance eligibility. But full reporting often doesn’t happen, particularly with cash tips, which are notoriously variable and hard to track.
Many restaurants also skimp on reporting their workers’ hours, and some forgo paying their workers a wage at all, forcing them to rely only on tips. A U.S. Department of Labor investigation early last decade found that nearly 9 in 10 restaurants violated wage and hour laws.
May was eventually approved for assistance after calling several members of Congress and her state’s unemployment office. But her case is an exception.
“Most people just drop it. They won’t file a request for a reconsideration to reconsider their eligibility based on their tips,” said Andrew Stettner, a senior fellow at the Century Foundation who studies unemployment.
Patrick Smith applied for unemployment in early April, shortly after the upscale Pittsburgh eatery where he worked 50 or 55 hours a week shut its doors. Just last week, he received a letter from Pennsylvania’s…
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