Benefits And CompensationHR Management Compliance

New DOL Regs Present Readability for Compensating Tipped Workers


The U.S. Division of Labor (DOL) not too long ago introduced a remaining rule amending the Truthful Labor Requirements Act (FLSA) laws protecting tipped staff. Barring any adjustments, the rule takes impact in February 2021.


Tip Sharing and Tip Pooling

Below the revised laws introduced in late December 2020, employers are explicitly prohibited from retaining any suggestions obtained by their staff for any function, no matter whether or not the enterprise takes a tip credit score. Most managers or supervisors are also prohibited from receiving any portion of staff’ suggestions.

If your organization takes a tip credit score, it’s essential to proceed to make sure any obligatory, “conventional” tip pool consists of solely staff who usually and frequently obtain suggestions. The brand new laws, nevertheless, now permit these of you who don’t take a tip credit score—i.e., pay a minimum of the total minimal wage—to implement obligatory, “nontraditional” tip swimming pools that will embrace back-of-the-house staff resembling cooks and dishwashers.

If you happen to select to implement the obligatory, nontraditional tip pool, it’s essential to comply with related recordkeeping necessities as those that function conventional, obligatory swimming pools, resembling (1) figuring out staff who obtain recommendations on payroll data and (2) recording the quantities of suggestions obtained by every particular person.

The brand new laws additionally make clear that if you acquire tricks to distribute as a part of a compulsory tip pool (conventional or nontraditional), it’s essential to absolutely redistribute the information a minimum of as usually as you pay different wages.


Moreover, the ultimate rule offers readability on when an worker is performing tipped work for which you’ll take a tip credit score. Chances are you’ll take a credit score throughout instances when tipped staff carry out associated nontipped duties both concurrently with or for an affordable time both earlier than or after their tipped obligations.

In keeping with the DOL, a nontipped obligation is presumed to be “associated to” a tip-producing occupation if it’s listed as a process of the tip-producing occupation in O*NET, a website with detailed descriptions of assorted occupations. For instance, the positioning says some duties of servers embrace taking orders from patrons, checking with prospects to make sure they’re having fun with their meals, and accumulating funds from them.

Concluding Ideas

The DOL’s current steerage for tipped occupations has been the topic of great litigation, and it’s doable an get together could problem the brand new laws. Congress could act to revoke the regs, or a future administration could repeal them. Barring any such actions, nevertheless, the brand new guidelines are scheduled to turn into efficient in February 2021.

Though the laws are relevant to the federal FLSA, take into accout state and native wage and hour legal guidelines could present extra necessities and limitations on the compensation for tipped staff, which can have an effect on the steerage above. Some states, for instance, prohibit obligatory tip sharing preparations that may in any other case be permissible beneath the FLSA. Make certain you adjust to not solely the federal regulation but additionally all relevant state and native legal guidelines.

Tessa L. Castner and Kyle D. Johnson are attorneys with Frost Brown Todd LLC. You may attain them at [email protected] or [email protected].

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