Labor Department Is Working on New Tip-Sharing Rule

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The U.S. Department of Labor (DOL) has sent a proposed rule on tipped workers' wages to the White House for review. The new proposal may replace the prior administration's final rule, which was set to take effect in March but was delayed until April.

The prior administration's rule would have made it easier for restaurants and other hospitality businesses to allow "back-of-the-house" workers—such as cooks and dishwashers—and other nontipped workers to share in gratuities under the Fair Labor Standards Act (FLSA).

We've gathered articles on the rule from SHRM Online and other trusted media outlets.

Details of New Proposal Not Made Public

The DOL's Wage and Hour Division sent a new proposal to the White House that would revisit the delayed final rule, which was issued toward the end of the Trump administration and was scheduled to take effect on March 1. The department delayed the rule until April 30 in accordance with a presidential directive asking all federal agencies to freeze proposed regulations and those with pending effective dates. The details of the new proposal won't be available to the public until the White House regulatory office signs off on it.

(Bloomberg Law)

Sharing Gratuities

The DOL may withdraw the prior administration's rule, which addressed changes to the FLSA's tip-credit regulations that were made under the Consolidated Appropriations Act of 2018. The rule would allow hospitality workers who are traditionally not tipped to share in gratuities under the FLSA. Eligible employers would have to pay participants in the tip pool the full minimum wage instead of taking a so-called tip credit, which allows employers that meet certain criteria to pay servers, bartenders and other tipped workers less than minimum wage, as long as their tips make up the difference. The final rule would prohibit management from keeping any portion of employees' tips regardless of whether the employer takes a tip credit and would codify DOL guidance on how the tip credit applies to employees who perform a mix of tipped and nontipped duties.

(SHRM Online)

States Challenge Tip-Sharing Rule

The prior administration's rule codified DOL guidance eliminating the 80/20 rule, which only allowed employers to take a tip credit for workers who spent no more than 20 percent of their time on nontipped duties. The rule would more broadly allow employers to take a tip credit when tipped employees perform related side jobs (such as rolling silverware into napkins) either during, just before or a reasonable time after tipped duties. On Jan. 19, eight states and the District of Columbia filed a lawsuit challenging the rule, claiming it will lower wages for tipped workers. The lawsuit claims that the DOL didn't adequately identify and weigh the costs and benefits of eliminating the 80/20 rule and, therefore, the DOL arbitrarily eliminated the rule in violation of the Administrative Procedures Act.

(Jackson Lewis

More Opinion Letters Expected to Be Reviewed

In January, the DOL rescinded several opinion letters issued in the last days of the prior administration that addressed tipped workers and independent-contractor status under the FLSA. "These letters were issued prematurely because they are based on rules that have not gone into effect," according to the DOL. The new administration is expected to thoroughly review other FLSA opinion letters that were issued by the prior administration. More opinion letters may be withdrawn as the department aligns with the new administration's priorities.

(The National Law Review)

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