Department of Labor Announces Long-Awaited Tip Regulations

On Dec. 22, the Department of Labor announced a final rule revising its tipped employee regulations to address amendments made to section 3(m) of the Fair Labor Standards Act (FLSA) by the Consolidated Appropriations Act of 2018 (CAA). The long-anticipated U.S. Labor Department regulations, which the restaurant industry lobbied for throughout the Trump administration, can now be published and take effect in the final weeks before President-elect Joe Biden takes office. Among other changes, the regulations do the following:

• Strike the portions of its current regulations that prohibit employers, who pay their tipped employees a direct cash wage at least equal to the federal minimum wage and do not take a tip credit, from establishing mandatory tip pools with employees who do not customarily and regularly receive tips, such as dishwashers and cooks;
• Amend the regulations which prohibit employers—regardless of whether they take a tip credit— from keeping employees’ tips for any purposes, including allowing managers and supervisors to keep the tips;
• Amend the tip pooling provisions to clarify that the prohibition on keeping tips applies regardless of whether the employer takes a tip credit and precludes employers from including themselves, managers, and/or supervisors in employer-mandated tip pools; and, explain that an employer may institute a mandatory tip pool that requires employees to share or pool tips with other eligible employees;
• Provide that any employer that collects tips to facilitate a mandatory tip pool must fully redistribute the tips, no less often than when it pays wages, to avoid “keep[ing]” the tips in violation of section 3(m)(2)(B). Set forth the different tip-pooling requirements for employers that take a tip credit and for those that do not;
• Clarify that an employer that requires a tip pool must pay a direct cash wage of at least the full federal minimum wage to any tipped employee who contributes tips to the pool. The Department is also proposing that an employer may take a tip credit for time that an employee in a tipped occupation performs related, non-tipped duties contemporaneously with or a reasonable time immediately before or after performing the tipped duties;
• Address which non-tipped duties are related to a tip-producing occupation;
• Incorporate the Department’s recent guidance on when an employee performing non-tipped work is a tipped employee.

Should you have questions regarding the regulations, please contact Maria Dwyer at mdwyer@clarkhill.com or your Clark Hill attorney.

The views and opinions expressed in the article represent the view of the author and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is intended to be a substitute for professional legal advice.