HR Newsletter: DOL Amends Employee Tip Regulations

Department of Labor

On Dec. 22, 2020, the U.S. Department of Labor (DOL) announced a final rule to amend employee tip regulations under the Fair Labor Standards Act (FLSA). The final rule will become effective 60 days after its publication in the Federal Register.

  • Tip Pooling – The FLSA allows employers to collect all the tips employees receive into a common employee tip pool, then redistribute these tips among employees in an equitable manner.
  • The Final Rule – This new final rule prohibits employers from keeping their employees’ tips and specifically prohibits managers and supervisors from keeping any portion of employee tips, including tips from a tip pool. In addition, the rule limits an employer’s ability to implement mandatory tip pools that include non-tipped employees and incorporates a new recordkeeping requirement for employers that do not take a tip credit but collect employees’ tips to operate a mandatory tip pool. Finally, the new rule also incorporates new civil monetary penalties, codifies recent DOL guidance on how to compensate a tipped employee who performs non-tipped duties at work and harmonizes FLSA requirements with Executive Order 13658 (Establishing a Minimum Wage for Contractors).

  • Impact on Employers – Employers with tipped employees should become familiar with these new regulations and adjust their timekeeping, tip pooling and payroll practices to comply with this rule by its effective date.

The FLSA also allows employers to pay a subminimum wage rate to individuals who are engaged in an occupation in which they “customarily and regularly” receive at least $30 in tips per month. Please contact us with any questions related to tips and their affect on payroll.