The U.S. Department of Labor (DOL) announced a proposed rule for tip provisions of the Fair Labor Standards Act (FLSA) implementing provisions of the Consolidated Appropriations Act of 2018 (CAA). The proposal would also codify existing Wage and Hour Division (WHD) guidance into a rule.
The CAA prohibits employers from keeping employees’ tips. During the development of those provisions, the Department provided technical assistance to Members of Congress. 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. Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees.
Additionally, the proposed rule reflects the Department’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 Notice of Proposed Rulemaking (NPRM), the Department 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.
This NPRM will be available for review and public comment for 60 days. The Department encourages interested parties to submit comments on the proposed rule.The Department’s current NPRM publishes on October 8, 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 www.regulations.gov .
Note: On December 9, 2019, the Department announced an extension to the period for submitting written comments on the Notice of Proposed Rulemaking (NPRM) entitled “Tip Regulations Under the Fair Labor Standards Act (FLSA).” The comment period now ends on December 11, 2019. The Department is taking this action to provide interested parties additional time to submit comments in response to an outage causing most web browsers to refuse access to www.regulations.gov for a period of time.
Additional Information
- Notice of Proposed Rulemaking: Tip Regulations under the FLSA
- Fact Sheet
- Frequently Asked Questions
- News Release: (10/07/19): U.S. Department of Labor Issues Notice of Proposed Rulemaking for Tipped Employees