Labor Dept. issues proposed rule for tipped employees

As part of a proposal to ensure that employees’ tips are not stolen, the U.S. Department of Labor has announced a proposed rule for tip provisions of the Fair Labor Standards Act that would allow employers who do not take a tip credit to establish a tip pool for certain workers.

Under the proposed rule, the tip pool would be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks.

The Fair Labor Standards Act implements provisions of the Consolidated Appropriations Act of 2018. The CAA prohibits employers from keeping employees’ tips.

Cheryl Stanton, the Department of Labor’s wage and hour administrator, says the proposal offers a clear pathway for both employers and employees to legally operate a tip pool.

The proposed rule would not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees.

An employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (currently $2.13 per hour) and the federal minimum wage.

Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees. 

In addition, the proposed rule reflects the Department of Labor’s guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties with tipped duties.

For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties.

The proposed regulation also addresses which non-tipped duties are related to a tip-producing occupation.

The proposed rule is available for review and public comment for 60 days, and the Department of Labor encourages interested parties to submit comments on the proposed rule. It can be found, along with the procedures for submitting comments, at the Wage and Hour Division’s Proposed Rule website.