Tip Regulations under the Fair Labor Standards Act

​U.S. Department of Labor (DOL) Announced a Notice of Proposed Rulemaking (NPRM) for Tip Credit Provisions under the Fair Labor Standards Act (FLSA).

The Consolidated Appropriations Act of 2018 (CAA) prohibits employers from keeping employees’ tips.  DOL’s proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks.

The proposed rule would not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees. An employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (currently $2.13 per hour) and the federal minimum wage.

Additionally, the proposed rule reflects the DOL’s guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties with tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties. The proposed regulation also addresses which non-tipped duties are related to a tip-producing occupation.

In this NPRM, the DOL proposes to:

• Explicitly prohibit employers, managers, and supervisors from keeping tips received by employees;

• Remove regulatory language imposing restrictions on an employer’s use of tips when the employer does not take a tip credit. This would allow employers that do not take an FLSA tip credit to include a broader group of workers, such as cooks or dishwashers, in a mandatory tip pool.

• Incorporate in the regulations, as provided under the CAA, new civil money penalties, currently not to exceed $1,100, that may be imposed when employers unlawfully keep tips.

• Amend the regulations to reflect recent guidance explaining that an employer may take a tip credit for any amount of time that an employee in a tipped occupation performs related non-tipped duties contemporaneously with his or her tipped duties, or for a reasonable time immediately before or after performing the tipped duties.

• Withdraw the Department’s NPRM, published on December 5, 2017, that proposed changes to tip regulations as that NPRM was superseded by the CAA.
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The DOL’s Tip Regulations under the Fair Labor Standards Act NPRM published on October 8, 2019.  This NPRM will be available for review and public comment for 60 days. Any interested parties should submit comments on the proposed rule. Comments must be received on or before December 9, 2019.  Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record and will be posted without change to http://www.regulations.gov.

Author

Making a mistake with your tip credit can be costly.  Illegal deductions and not ensuring your employees receive enough to cover minimum wage can cause you to lose your tip credit, pay back wages, liquidated damages and civil money penalties.  I can help you navigate the complicated, ever-changing regulations to make sure you are in compliance with Federal labor laws.  Dawn M. Farias