DOL Final Tip Credit Rule - Year-End Regulatory Victory for Restaurants
The IRA applauds the U.S. Department of Labor (DOL) final rule revising tipping regulations under the Fair Labor Standards Act (FLSA). The IRA, National Restaurant Association, and its affiliate the Restaurant Law Center advocated for many of the changes enacted in the final rule which makes tipping regulations more practical and workable for the restaurant industry and – more importantly – brings them into greater alignment with the FLSA.
The final rule has two major parts that impact the industry:
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It removes the portions of the regulations that prohibited employers that do not take a tip credit from implementing mandatory “nontraditional” tip pools. This means that employers who do not take a tip credit may pool tips and share with the back-of-house employees. The final rule does not change tip pooling requirements for restaurants that use tip credit and count tips as a part of employee wages. The final rule also contains safeguards and compliance measures regarding tip pools. Importantly, it explicitly prohibits employers–regardless of whether they take a tip credit–from keeping employees’ tips for any purpose, which includes prohibiting managers and supervisors from keeping tips received by employees.
- The final rule includes codification of interpretation of the so-called ‘80/20 rule’ that governs how and when tips can be counted as part of an employee’s wages when doing side work. The final rule reflects DOL’s informal guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties.
The rule will have a 60-day effective date once published in the federal register, which means the rule will become effective during the incoming-Biden Administration. We expect the Biden Department of Labor to delay the effective date and potentially issue their own Notice of Proposed Rulemaking to rescind and revise this rule and/or encourage the Democrats Attorneys General to file a legal challenge against the rule on procedural grounds. More to come in the new year.
Click here for more information about the final rule.
