Employers may not keep employees' tips; wider tip pools on the horizon
Two parts of the final rule of the “Tip Regulations under the Fair Labor Standards Act (FLSA)” are moving forward after being on hold for further review under the Biden administration. The rest of the tip rules will likely get revamped between now and the end of the year.
The U.S. Department of Labor (DOL) will allow these two rules to go into effect on April 30, 2021:
- Employers may not keep employees’ tips. Whether or not an employer takes a tip credit, they (including supervisors and managers) cannot keep tips received by workers.
- Cooks, dishwashers, and other back-of-house workers can be in a tip pool. Employers that pay full minimum wage and do not take a tip credit, may create a broader tip pool that includes traditionally non-tipped workers (like cooks) along with front-of-house staff (like servers).
By allowing these changes to move forward, it may increase more employees’ earnings and allow employers more pay flexibility. Plus, it may help reduce wage disparities among workers.
As you may recall, in December 2020, the DOL announced a final rule revising the FLSA’s tipped employee regulations. The original effective date was March 1, 2021. However, that date got bumped back to April 30, 2021.
What’s being held back and reviewed?
Through the notice of proposed rulemaking process (NPRM), the DOL wants to withdraw and repropose two portions of the tip regulations, including:
- The portion that narrows the circumstances in which civil money penalties may be assessed for tip violations.
- The portion that addresses “managers or supervisors” to better understand those who also engage in tipped work.
The DOL is also seeking public comments on how to improve recordkeeping requirements regarding tips.
In a second NPRM, which is related to the one described above, the DOL proposes to extend the effective date of three portions of the 2020 Tip final rule to December 31, 2021, including:
- Two portions that address monetary penalties against employers who violate the tip rules.
- One portion that addresses tipped employees who perform both tipped and non-tipped duties (i.e., dual jobs).
DOL representatives state, “The additional eight-month extension would provide the department the opportunity to evaluate additional information about the questions of law, policy, and fact raised by these portions of the 2020 Tips final rule … tipped workers are among those hardest hit amid the pandemic.”
Both NPRMs were published in the Federal Register on March 25, 2021. The public can submit comments between now and May 24, 2021.