DOL publishes guidance on tip pooling

Response to the government spending bill

Posted April 16, 2018

Among the provisions in the newly signed Consolidated Appropriations Act (the measure to adopt government funding for the next six months), are changes to the Fair Labor Standards Act (FLSA) in regard to employee tip pooling. In response to the change, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued a Field Assistance Bulletin to address enforcement of the revision.

Because of a provision in the new law, workplaces may again establish tip pooling arrangements between tipped “front of the house” and non-tipped “back of the house” staff, such as cooks and dishwashers. The bill vacated the WHD’s 2011 regulations. To take advantage of the revision, employers need to pay tipped employees at least the full federal minimum wage, and not claim a tip credit. Employers who do claim a tip credit, however, may allow tip pooling only between “front of the house” employees.

Employers are, however, prohibited from keeping tips received by their employees, regardless of whether the employer takes a tip credit. Managers and supervisors are also prohibited from participating in tip pools.

To be a supervisor or manager, an employee must meet the following criteria:

  • Primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;
  • Customarily and regularly directs the work of two or more other employees; and
  • Authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

Employers may continue to deduct credit card processing fees associated with processing credit card tips. Left unexplained, however, are issues such as whether detailed notices are required.

For the first time, Congress gave the WHD authority to prevent employers from taking employees’ tips in all circumstances.

The bulletin indicates that WHD will immediately begin using its new enforcement tools by recovering all tips unlawfully kept by employers, and imposing liquidated damages and civil monetary penalties as appropriate. Unlawfully keeping employee tips can risk the imposition of civil money penalties of up to $1,100.

This article was written by Darlene M. Clabault of J. J. Keller & Associates, Inc.


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