DOL publishes final rule on tip sharing and penalties for employers
The US Department of Labor (DOL) may fine employers under more circumstances when they violate federal tip sharing regulations under a recently published rule. The rule also specifies when managers and supervisors can keep tips they have received.
“The final rule … Strengthens the protection of tipped workers – who are largely women, immigrants and people of color – and advances fairness in the workplace, ”said Jessica Looman, Acting Administrator of the Division of DOL wages and hours.
The rule will take effect on November 23.
Who can share in tip pools?
Under the Fair Labor Standards Act (FLSA), restaurants and other hospitality employers may be eligible for tip credit, which means they can pay tip workers (such as waiters and bartenders. ) less than the standard minimum wage, provided that workers’ tips make up the difference.
But employers have more flexibility to pool tips when they pay at least the standard minimum wage. “An employer who pays his employees with tips the full minimum wage and does not take tip credit can impose a tip-pooling agreement that includes dishwashers, cooks or other employees of the company. ‘establishment who do not exercise a profession in which employees usually and regularly receive tips, “according to the DOL.
Employers, including managers and supervisors, are prohibited from participating in a tip pool or retaining employee tips, whether or not the employer receives tip credit.
However, the final rule specifies that managers and supervisors can contribute to mandatory tip pools. In addition, the rule explains that managers and supervisors can retain tips they receive directly from customers for services they provide “directly” and “only”.
“The DOL Final Rule has now better identified the circumstances under which a manager or supervisor can retain client advice and share it with others as part of the FLSA,” said Justin Barnes, attorney for Jackson Lewis at Atlanta, and Jeffrey Brecher, lawyer. with Jackson Lewis in Long Island, NY, in a joint statement.
While the rule provides some clarity, employers should also consider any applicable requirements of state law. “It is important to note that some state laws expressly prohibit the sharing of tips between employees with and without tips under any circumstances,” they explained.
Civil pecuniary sanctions
A now repealed rule issued by the previous administration would have allowed the DOL to assess penalties for violations of the tip rule only when the department found that the employer repeatedly or voluntarily withheld tips from employees.
Under the new rule, employers can face fines of up to $ 1,100 whenever the department finds that an employer has retained employee tips, whether the violation is repeated or willful, noted. Christopher Cognato and Steven Suflas, attorneys for Ballard Spahr, based in Philadelphia. and Salt Lake City, respectively.
“The rule represents another step the agency has taken to protect tipped workers, by clearly notifying employers in the hospitality industry and others with tipped employees that it intends to enforce. [FLSA] demands aggressively, ”they said.
The rule also revises the definition of “voluntary” in the tip credit regulations to include employer violations that are committed with “reckless disregard” for FLSA demands, noted Cognato and Suflas.
“An employer disregards the FLSA when, among other situations, the ministry determines on the basis of all the facts and circumstances that the employer should have investigated whether their conduct was legal but did not do so. adequately ”, according to the reign.
Performing tasks with and without tips
The final rule did not address the so-called 80/20 rule, noted Barnes and Brecher.
The 80/20 rule allows employers to take tip credit only for workers who have not spent more than 20 percent of their time on non-tip tasks.
A rule revoked from the previous administration would have codified the DOL guidelines by eliminating the 80/20 rule. The withdrawn rule would have more broadly allowed employers to take tip credit when tip employees perform related ancillary tasks (such as rolling silverware in napkins) either during, just before, or a reasonable amount of time after tip duties.
The preamble to the current administration’s final rule, however, stated that the DOL is still assessing the problem and that the ministry will address it in a separate final rule.
Context of the revoked rule
Former President Donald Trump’s administration issued a final rule amending the FLSA’s requirements for tipping workers, which was due to go into effect on March 1. After President Joe Biden’s inauguration, however, the White House asked federal agencies to freeze proposed and pending regulations to give new leaders time to review pending rules and DOL delayed rule. sharing tips.
In March, the DOL announced that “after a thorough review” the following parts of the final rule would take effect on April 30:
- The provision that prohibits employers from keeping workers’ tips whether or not the employer receives tip credit.
- The provision that allows employers who do not take tip credit to include non-tip workers, such as cooks and dishwashers, in tip pools.
The record keeping requirements of the final rule also came into effect. However, the DOL proposed new rules to remove and replace other parts of the rule from the previous administration.
“Tipped workers are among the hardest hit amid the pandemic, and the division of wages and hours has made protecting these essential frontline workers a priority,” Looman said.