Tip Credit Proposed Rules Are Out For Comment
“When mores are sufficient, laws are unnecessary; when mores are insufficient, laws are unenforceable.”
― Émile Durkheim
In March 2018, Congress amended sections of the FLSA with the Consolidated Appropriations Act (CAA). Some of the important updates included were restrictions on the tip credit that employers could take and regulations regarding tip pooling. A notice of proposed rulemaking was finally published by the Department of Labor (“DOL”) in the Federal Register on October 8, 2019 seeking comments on new regulations to implement the law.
The current law under § 203(m)(2)(b) states that employers are restricted from taking the tips of employees for any and all purposes. The act created a private right of action for employees to recover tips that managers took from them and liquidated damages in §§ 216(b)-(c). However, a manager was able to pool and distribute tips from their employees if they redistributed them to other eligible employees who customarily and regularly received tips. After some confusion resulting from a 2011 revision to the C.F.R., the CAA stated that the restrictions on eligibility for the tip pool were no longer in effect. The CAA allows employers to take a maximum tip credit of $5.12 an hour. Regardless of the tip credit issue, a manager or a supervisor may not participate in the tip pool or retain the tips of their employees.
The proposed regulation incorporates the amendments included in the CAA. To clarify, the DOL keeps § 531.54 intact, which is a restriction on the tip pool requiring employers taking a tip credit to institute only traditional tip pools. Traditional tip pools can only include employees who customarily and regularly receive tips. The DOL makes clear that this provision only applies to the employers taking a tip credit. Those that pay a full or greater FLSA minimum wage may institute non-traditional tip pools. Furthermore, employers would be able to receive a tip credit for the time an employee spends performing non-tipped duties if they are performing them contemporaneously with their tipped duties. An example would be a waiter or waitress who cleans tables or makes coffee while not servicing tables. This “dual jobs” provision allows employers to retain the tip credit for the hours that the employee is performing both jobs.
The DOL seeks to update its regulations to implement laws created by the CAA. The 2011 regulations caused confusion resulting in litigation and circuit splits over the tip pool and tip credit. After the CAA, the DOL needed to update the regulations to follow the intent of Congress by initiating the rulemaking process. The proposed rules were published in the Federal Register on October 8th, 2019 and the DOL will be soliciting comments until December 9th, 2019. For more information or to submit comments please visit the Federal Register here: