On Tuesday, the Department of Labor (DOL) announced that it had issued two Notices of Proposed Rulemaking (NPRM) concerning tipped workers’ compensation. If adopted, the NPRM would delay, for a second time, the effective date of several rules the agency published during the Trump Administration. Though for now the move is merely a delay, it sets the stage for the Biden Administration to put its own presumably employee-friendly stamp on regulations concerning tipped workers’ wages and the practice of tip pooling in the near future.
Under the Fair Labor Standards Act (FLSA), employers with workers who customarily receive tips may count those tips as wages for purposes of determining whether employees have received minimum wage. In 2018, Congress established several limits on tip crediting, including a prohibition on employers’ keeping any tips and a rule against including managers and supervisors in any tip pools. The legislation also established that employers that choose not to take a credit may include non-tipped employees, like cooks and dishwashers, in tip pools. The Trump-led DOL issued regulations pursuant to those legislative changes but, in February 2021, the Biden Administration suspended the pending rules until the end of April.
Despite the delay, by May 1, 2021, employers should be prepared to comply with new rules that prohibit employers from retaining any tips. Also, consistent with recent changes, employers who do not take tip credits may continue to allow non-tipped workers to participate in tip pools. Employers should also remain mindful of the FLSA’s general rules that remain in place: Tipped employees must make at least the minimum wage and, if their tips do not cover it, employers must make up the difference. In addition, employers with tip pools must communicate the terms of the pool to all affected employees
The DOL’s newly announced delay concerns rules about employees who engage in both tipped and non-tipped work, including managers and supervisors, and penalties that employers may face for violating tip-credit standards. These rules won’t become effective until at least the end of the year. It is very likely that, by then, the agency will publish a new set of proposed standards. For now, employers who wish to comment on the DOL’s push-back proposal may do so for the next 18 days. Comments can be shared via http://www.regulations.gov.