DOL Delays Portions of Tip-Sharing Rule

Remainder of the final tip regulation takes effect April 30

Stephen Miller, CEBS By Stephen Miller, CEBS April 28, 2021
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DOL Delays Portions of Tip-Sharing Rule

On April 28, the U.S. Department of Labor (DOL) issued guidance delaying until Dec. 31 the effective date of three portions of a 2020 final rule on tip sharing. The delayed portions are related to the assessment of civil money penalties against employers for violations of the Fair Labor Standards Act (FLSA) and the application of the FLSA tip credit to tipped employees who perform tipped and nontipped duties.

The remainder of the 2020 tip final rule issued last December will take effect on April 30. This includes provisions that:

  • Prohibit employers from keeping workers' tips, regardless of whether the employer takes a tip credit.
  • Allow employers that do not take a tip credit to include nontipped workers—such as cooks and dishwashers—in tip pools.

The final rule's record-keeping requirements will also take effect.

New Administration Reviewed Rule

Under the FLSA, restaurants and other hospitality employers may be eligible to take a tip credit, meaning they can pay tipped workers (such as servers and bartenders) less than the standard minimum wage, as long as workers' tips make up the difference.

Former President Donald Trump's administration issued the final rule amending the FLSA requirements for tipped workers, which was scheduled to take effect on March 1. The final rule prohibited employers from allowing managers or supervisors to keep any portion of employee's tips, and addressed how the tip credit applies to employees who perform tipped and nontipped duties and which nontipped duties are related to a tip-producing occupation.

President Joe Biden's administration asked federal agencies to freeze proposed and pending regulations to give new leaders time to review pending rules, and the DOL delayed the tip-sharing rule until April 30. The DOL said that its new, partial-delay final rule gives it time to withdraw and repropose portions of the 2020 tip final rule related to the assessment of civil money penalties, presumably to give these fines more bite.

"Tipped workers are among those hardest hit amid the pandemic, and the Wage and Hour Division has made protecting these essential front-line workers a priority," said Jessica Looman, the DOL's Wage and Hour Division deputy administrator. "These essential workers deserve our careful and thoughtful consideration as we craft and implement rules that affect their well-being."

Comments Requested

The DOL is also asking for comments on whether to revise—and strengthen—the portion of the 2020 tip final rule that bans managers and supervisors from keeping employee's tips, and for comments on how the department might improve the record-keeping requirements outlined in the 2020 tip final rule.

The comment deadline is May 24. Comments can be submitted at www.regulations.gov.

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