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Federal - DOL Proposed Rule for FLSA Tip Provisions

On October 7, 2019, the U.S. Department of Labor (DOL) announced a notice of proposed rulemaking (NPRM) for tip provisions of the Fair Labor Standards Act (FLSA) implementing provisions of the Consolidated Appropriations Act of 2018 (CAA) and codifying existing Wage and Hour Division (WHD) guidance into a rule.

The CAA prohibits employers from keeping employees’ tips. The NPRM 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. Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees.

Additionally, under the proposed rule 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.

The proposed rule would also:

  • 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 up to $1,100, that may be imposed when employers unlawfully keep tips.
  • Amend the regulations so 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 at the same time as his or her tipped duties, or for a reasonable time immediately before or after performing the tipped duties.
  • Withdraw the DOL’s NPRM, published on December 5, 2017, that proposed changes to tip regulations as that NPRM was superseded by the CAA.

The NPRM will be available for review and public comment for 60 days. The DOL’s current NPRM publishes on October 8, 2019.

Read the NPRM