DOL Issues Final Tips Rule for Civil Money Penalties


All Employers with Tipped Employees


November 23, 2021


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The U.S. Department of Labor (DOL) recently published a Tips Rule addressing civil money penalties (CMPs) for violations (2021 tips rule). In 2020, the DOL published a tips rule that was later partially delayed in 2021 (2020 tips rule). The three delayed portions are related to the assessment of CMPs under the Fair Labor Standards Act (FLSA) and the application of the FLSA tip credit to tipped employees who perform tipped and non-tipped duties (dual jobs). The remainder of the 2020 tip rule—consisting of those portions addressing the keeping of tips and tip pooling, recordkeeping, and minor technical changes made to update the regulations to reflect the new statutory language and citations added by the CAA amendments—became effective on April 30, 2021.

The 2021 tips rule defines “willful” violations to be where the employer knew that its conduct was prohibited by the FLSA or showed reckless disregard for the requirements of the FLSA. “Reckless disregard” of FLSA requirements includes, but is not limited to, circumstances when the employer should have inquired further into whether its conduct was in compliance with the FLSA and failed to make adequate further inquiry.

The 2021 tips rule restores the DOL’s ability to assess CMPs of up to $1,162 per violation against employers who take tips earned by their employees, regardless of whether those violations are repeated or willful. The final rule also clarifies that while managers or supervisors may not receive tips from mandatory tip pools, managers and supervisors are not prohibited from contributing tips to eligible employees in such pools.

Action Items

  1. Review the 2020 and 2021 tips rules for compliance.
  2. Update tip pooling practices consistent with the new rules.
  3. Train appropriate personnel on the current tip pooling requirements.
  4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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