News & Announcements
DOL Announces Proposed Rule Regarding Tip Credits
The U.S. Department of Labor (“DOL”) recently announced a proposed rule amending tip provisions of the Fair Labor Standards Act (“FLSA”).
The FLSA generally requires covered employers to pay employees at least the federal minimum wage of $7.25 per hour. The FLSA also allows an employer that meets certain requirements to take a “tip credit” to offset its federal minimum wage obligation.
Key Points of the Proposed Rule
- All employers, regardless of whether they take a tip credit, may not keep employees’ tips and may not allow managers or supervisors to keep employees’ tips.
- Whether someone is a “manager” or “supervisor” would be determined under FLSA’s executive employee overtime exemption.
- An employer will not be considered to improperly “keep” tips when it (1) holds the tips until the next regularly scheduled payday; or (2) collects and redistributes tips to employees in a tip pool.
- Employers who do not take a tip credit may include employees who do not customarily and regularly receive tips (such as cooks and dishwashers) in mandatory tip pooling arrangements.
- The proposed rule would not impact regulations providing that employers who take a tip credit may only include traditionally tipped employees in a tip pool.
- Recordkeeping requirements would apply to employers that do not take a tip credit, but still collect employees’ tips to operate a mandatory tip pool.
- An employer may take a tip credit for any amount of time 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.
- The proposed rule also addresses which non-tipped duties are related to a tip-producing occupation.
- Civil monetary penalties of up to $1,100 (adjusted by inflation annually) may be imposed when an employer unlawfully keeps tips.
The DOL encourages any interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA21. Comments must be received on or before December 9, 2019.