Final rule allows US Department of Labor to levy civil money penalties against employers who take workers’ tips

WASHINGTON – The U.S. Department of Labor today announced a final rule that restores the department’s ability to assess civil money penalties against employers who take tips earned by their employees, regardless of whether those violations are repeated or willful. In addition, today’s rule modifies the department’s broader civil money penalties regulations addressing when a violation is willful, further aligning these regulations with applicable precedent and how the department litigates willfulness. The rule also allows managers and supervisors to contribute to valid tip pooling arrangements, without receiving tips from those pools.

“Workers who depend on tipped wages are every bit as entitled to expect to keep what they’ve earned as other workers,” said U.S. Secretary of Labor Marty Walsh. “An employer who withholds workers’ tips in violation of the law deprives them of that security and, in some cases, leads to workers earning less than the federal minimum wage. This final rule helps us protect their earnings by strengthening tools to hold employers legally responsible for those violations.”

With this rule’s publication, the department withdraws the civil money penalties’ provisions in the 2020 Tip final rule that would have allowed the department to assess these penalties for violations only when employers kept employees’ tips and the department found their violations to be repeated or willful. The Consolidated Appropriations Act of 2018 allows the department to impose civil money penalties to $1,100 when employers keep employees’ tips – in violation of the law – regardless of whether violations are repeated or willful.

The final rule also clarifies that – while managers and supervisors may not receive tips from mandatory tip pools or tip-sharing arrangements – managers or supervisors may contribute to mandatory tip pools or sharing arrangements. In addition, the rule clarifies that a manager or supervisor may keep tips only when the manager or supervisor receives tips from customers directly for service a manager or supervisor directly and “solely” provides.

“The final rule announced today strengthens protections for tipped workers – who are largely women, immigrants and people of color – and advances equity in the workplace,” said Wage and Hour Division Acting Administrator Jessica Looman. “Civil money penalties are an incentive for employers to comply with their legal responsibilities. When they do comply, essential workers benefit. When employers don’t comply, these penalties are a useful enforcement tool we can use to help achieve compliance.”

The Fair Labor Standards Act allows employers with tipped workers to pay as little as $2.13 per hour in direct wages, while taking a credit against the tips earned by the employee to make up the balance of the federal minimum wage of $7.25 per hour.

For more information on protections for tipped workers and others under the FLSA, or learn more about the Wage and Hour Division. You may also call toll-free 1-866-4US-WAGE to speak directly and confidentially to a trained Wage and Hour Division professional. The division protects workers regardless of immigration status, and can communicate with workers in more than 200 languages.