Labor Secretary Weighs in on Tip Pooling

Labor Secretary Weighs in on Tip Pooling

Labor Secretary Alexander Acosta says he backs legislation that would prevent employers from taking tips from workers.

"I fully support a provision that says establishments should not be permitted to keep any portion of a tip," he said at a March 6 U.S. House of Representatives subcommittee hearing. He suggested, however, that such a directive should come from Congress in the form of legislation, and not as a rule from his agency. 

The Department of Labor (DOL) announced in December 2017 a proposed rule that would clearly allow employers to make "front-of-the-house" employees who customarily receive tips—such as servers and bartenders—share tips with cooks, dishwashers and other "back-of-the-house" workers. While proponents of the rule say it would allow for more wage equity among workers who contribute to the customer experience, critics say nothing in the rule prevents employers from keeping tips.

[SHRM members-only toolkit: Complying with U.S. Wage and Hour Laws and Wage Payment Laws]

We've rounded up the latest news on how the proposed tip-pooling rule might affect the workplace. Here are SHRM Online resources and news articles from other trusted media outlets.

Labor Department Is Considering Comments

As of the Feb. 5 deadline to respond to the rule, the DOL had received more than 380,000 comments. Supporters of expanded tip-sharing say it will help restaurants that operate on thin margins to pay everyone fairly. However, critics say that under the proposed rule, employers could instead give tips to management or use them on building improvements or other projects. In a letter to Acosta, 124 members of Congress who oppose the rule change raised concerns that base pay for back-of-the-house workers might be slashed and replaced with a payout from tipped workers' earnings. The Labor Department doesn't know when a final decision will be made on the rule. 

(The Day)

Eligible Employers Must Pay Full Minimum Wage

The proposed rule would only allow back-of-the-house staff to share in tip pools if the employer pays participants the full minimum wage—instead of taking a tip credit that allows an employer to pay less than the minimum wage as long as tipped workers make up the difference in gratuities. Employers should be aware that tip-pool arrangements may also be limited or prohibited under applicable state laws.

(SHRM Online)

Good Tip-Sharing Policies Are Still Essential

While the DOL's proposed changes may simplify some issues—and reduce some litigation risks—good tip-sharing policies would still be essential. Employers that want to establish a tip pool, whether under the current rules or amended regulations, can protect themselves from litigation by identifying who are actually "tipped employees" under federal and state law, ensuring participants are qualified to be in the pool. Among other things, employers should also watch how they pay employees who work dual jobs that include tipped and nontipped work.

(SHRM Online)

Rule Would Undo Existing Regulations

The proposed rule would nullify the DOL's 2011 regulations—which were issued by President Barack Obama's administration—that deemed pooling tips with back-of-the-house employees unlawful, regardless of whether the employer took a tip credit or paid workers the standard minimum wage. Federal courts have disagreed as to whether the DOL exceeded its authority when it issued the 2011 rule and the Supreme Court has been asked to weigh in. The department's new rule, if finalized in its current form, would make the high-court petition unnecessary.

(SHRM Online)


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