On January 26, 2021, the U.S. Department of Labor (DOL) suspended the Final Rule on tipped employees that it had issued on December 22, 2020. The Final Rule would have clarified tip-pooling for employees in the food service and hospitality industry, as well as how the tip credit applied to employees who perform both tipped and non-tipped duties.

As discussed in our Alert, the Final Rule, originally issued under former President Trump’s administration, would have given employers more latitude in structuring their pay practices if they did not take a tip credit and otherwise paid the federal minimum wage. The Final Rule is now under review by the Biden administration and, in light of the President’s announced desire to eliminate the tip credit altogether, it seems likely that the rule will undergo additional rulemaking and may not take effect in its current form or at all.

The DOL also withdrew FLSA Opinion Letter FLSA 2021-4, which addressed when employers can maintain a tip pool that includes both employees who are subject to a tip credit and those who are not.  The DOL concluded that the letter, which was issued in the waning days of the Trump administration, was “premature” because it was based on the Final Rule that has not gone into effect.

These moves continue the trend of President Biden’s administration quickly rolling back many Trump-era changes. The Biden administration may seek to implement aspects of its agenda through new rulemaking, including rules that affect employers’ tip practices.

Read more in our Alert on the latest changes.