DOL Sends Proposed Rule on Employee Tip-Sharing to White House

 

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​Lawmakers have been working to revamp tip-pooling laws for the last several years and the U.S. Department of Labor (DOL) may soon announce a new proposal. 

The DOL sent a proposed tip-pooling rule to the White House Office of Management and Budget on July 26, according to Bloomberg Law. The rule would make it easier for employers to require "front-of-the-house" employees—such as servers and bartenders—who earn at least the standard minimum wage and customarily receive tips to share those gratuities with cooks, dishwashers and other "back-of-the-house" workers who aren't usually tipped, Bloomberg Law reported.

While the rule hasn't been made available to the public yet, proposed rules are usually published following White House review.

We've rounded up the latest news on this topic. Here are SHRM Online resources and news articles from other trusted media outlets.

DOL's Prior Proposal Sparked Heated Debate

The new proposal is similar to one that was announced in December 2017 but failed to move forward. The prior proposal aimed to overturn an Obama-era rule by giving employers the option of requiring certain workers who receive tips to share that money with non-tipped co-workers. While proponents of the rule said it would allow for more wage equity among workers who contribute to the customer experience, critics argued that nothing in the rule prevented employers from forcing workers to hand over tips to managers or keeping gratuities to pay for other business expenses.

(SHRM Online)

Tip-Sharing Rule Blocked in Government Spending Law

In March 2018, lawmakers approved a measure prohibiting employers from retaining workers' tips for themselves or managers. The provision was part of an omnibus spending bill to fund the federal government.

(SHRM Online)

Tipped Workers May Earn Less Than Minimum Wage

The federal Fair Labor Standards Act (FLSA) allows employers to pay workers who customarily receive tips less than the standard minimum wage as long as certain conditions are met. Employers can take a tip credit by paying servers, bartenders and other tipped workers as low as $2.13 an hour if those workers earn at least the standard minimum wage of $7.25 an hour once their tips are added in. However, if employers claim a tip credit, they can't require tipped workers to share their gratuities with non-tipped workers. So the new rules on tip sharing would only apply to workers who earn the full minimum wage.

(SHRM Online)

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

DOL Will Also Update 'Dual-Jobs' Regulation

The DOL will also propose revisions to the FLSA's "dual-jobs" regulation "to provide greater clarity" and consistency with current Labor Department guidance. The dual-jobs regulation addresses employees who may be employed in two separate jobs at once (one tipped and one non-tipped job). Under the so-called 80/20 rule, DOL guidance said that when tipped employees spent more than 20 percent of their workweek on non-tipped tasks, such as refilling condiment bottles, employers couldn't take a tip credit for the time spent on those duties. However, the DOL rescinded the 80/20 tip-credit rule in a 2018 opinion letter. The rule first appeared in the DOL Wage and Hour Division's Field Operations Handbook and the public was not given an opportunity to comment on it.

(Jackson Lewis)

States May Have Different Rules

Employers must check the applicable state laws before paying servers and bartenders a subminimum wage. These states don't allow a tip credit to be taken at all: Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington. This means employers must pay servers in Alaska, for example, at least $9.89 an hour (the state's minimum wage). Several other states permit a tip credit but require that workers be paid a higher cash wage than what is required under federal law. For example, in Arizona, employers must pay tipped workers at least $8 an hour, and workers must earn at least $11 an hour (the state's minimum wage) when tips are included.

(U.S. Department of Labor)

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