U.S. Department of Labor Announces Employer-Friendly Proposed Rule for Tip Provisions
The U.S. Department of Labor (DOL) announced a proposed tip-pooling rule that would give certain employers more flexibility in distributing pooled tips.FN1 Under the proposed rule, employers who do not take a tip credit and pay employees the full minimum wage may include employees who are not customarily and regularly tipped employees, such as back-of-house employees like dishwashers and cooks, in a mandatory tip pool.FN2
The proposed rule also officially eliminates the “80/20,” or “20%” ruleFN3 by providing 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, so long as the employees perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties.
Takeaway
The DOL’s proposed rule will be available for review and public comment for 60 days, until December 9, 2019. If, and likely when, this becomes a Final Rule, it will assist employers in managing growing labor costs in light of minimum wage increases and eliminate burdensome monitoring of tipped employees’ non-tip generating time. Importantly, however, the proposed rule does not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees.
Footnotes:
FN1 https://www.federalregister.gov/documents/2019/10/08/2019-20868/tip-regulations-under-the-fair-labor-standards-act-flsa; see also U.S. Department of Labor Field Assistance Bulletin No. 2018-3, https://www.dol.gov/whd/FieldBulletins/fab2018_3.pdf.
FN2 The federal minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009. Many states, including Colorado, also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages. See https://www.dol.gov/general/topic/wages/minimumwage
FN3 The “80/20” rule or “20%” rule required employers to pay tipped employees the full minimum wage, rather than the lower cash wage applicable to tipped employees, if an employee spends more than 20% of his or her time during a workweek performing undefined duties that are not directly related to generating tips, such as setting tables, rolling silverware, or making coffee.