The New Tipped Employee Rule Regarding Tip-Pooling and Retention of Tips
Updated: Aug 6
By Paula Jackson
July 15, 2021
In April, the Department of Labor (“DOL”) partially implemented a Rule that regulates employers’ ability to keep tips and implement tip-pools, among other things, due to the Consolidated Appropriations Act of 2018’s amendments to the Fair Labor Standards Act (“FLSA”).
Under the Rule, an employer (including its managers and supervisors) cannot keep an employee’s tips, whether the employer takes a tip credit or not. However, if an employer does not claim a tip credit, it can now require a non-traditional tip-pooling arrangement that includes non-managerial workers who are “tipped” (such as servers) and “non-tipped” (such as cooks). According to the DOL, although managers and supervisors cannot keep other employees’ tips or be part of a tip pool under this Rule, managers and supervisors can still keep their own tips received directly from customers they served.
The Rule also imposes other responsibilities on employers, including requiring them to distribute tips from mandatory tip-pools when wages are paid and keep certain records (if they do not take a tip credit).
The DOL also recently proposed a Rule specifying that an employee who performs both tipped and non-tipped duties will only qualify for tip credit when performing: (1) tip-producing work, or (2) other “work that directly supports tip-producing work” if it is not performed for over 30 minutes at a time or for more than 20% of the employee’s total workweek hours.
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“Tip Regulations under the Fair Labor Standards Act (FLSA),” Department of Labor (“DOL”), https://www.dol.gov/agencies/whd/flsa/tips (last checked July 13, 2021); “Frequently Asked Questions,” U.S. D.O.L., https://www.dol.gov/agencies/whd/flsa/tips-questions#1 (last checked July 13, 2021); Fed. Register, Vol. 85, No. 250, at 86756-86757 https://www.govinfo.gov/content/pkg/FR-2020-12-30/pdf/2020-28555.pdf (last checked July 13, 2021). “Tip Regulations under the Fair Labor Standards Act (FLSA),” DOL, https://www.dol.gov/agencies/whd/flsa/tips (last checked July 13, 2021); Fed. Register, Vol. 86, No. 118, at 32818-20, https://www.govinfo.gov/content/pkg/FR-2021-06-23/pdf/2021-13262.pdf (last checked July 13, 2021).