LEGAL: DOL proposed rule revising tip pooling rules

By Jeff Jones
Special to the UCBJ

On Dec. 4, 2017, the Federal Department of Labor (DOL) announced a Notice of Proposed Rulemaking (NPRM) that will rescind a 2011 regulation prohibiting restaurants, bars and other service industry employers from requiring tipped employees, such as servers, to share tips with non-tipped employees such as cooks, dishwashers and managers.

The Fair Labor Standards Act (FLSA) requires covered employers to pay employees at least a Federal minimum wage, which is currently $7.25 per hour. However, it also allows employers to only pay a cash wage of $2.13 per hour to tipped employees as long as these tipped employees receive sufficient tips on a weekly basis to equal at least the difference between $7.25 and $2.13 ($5.12 per hour). This provision for paying the sub-minimum hourly rate also provides that the tipped employee retains all tips received except for tips contributed to a valid tip pool.

Under the 2011 regulations an employer can require tipped employees to contribute to a valid tip pool.  These regulations define a valid tip pool as being  limited to customarily and regularly tipped employees such as servers, bussers, bartenders and food runners. Managers, cooks and dishwashers were prohibited from receiving tips from the tip pool. The newly proposed regulations will lift this prohibition under certain circumstances.

The DOL proposal only applies where employers pay the full minimum wage to tipped employees.  In other words, under the proposal, only tipped employees being paid a cash wage of at least $7.25 per hour (or the State minimum wage, if higher) could be required to contribute to a tip pool that would be shared among non-tipped employees such as cooks, dishwashers and even managers.

The DOL also issued a nonenforcement policy on July 20, 2017, whereby the Wage and Hour Division no longer enforces the Department’s regulation on the retention of employees’ tips with respect to any employee who is paid cash wage of not less than the full FLSA minimum wage and for whom their employer does not take a tip credit, either for 18 months or until the completion of the new rulemaking.

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