New DOL Tip Rule Delayed


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In the Consolidated Appropriations Act of 2018, Congress amended section 3(m) of the Fair Labor Standards Act (FLSA) to prohibit employers from keeping tips received by their employees, regardless of whether the employers take a tip credit under section 3(m). The U.S. Department of Labor (DOL) recently issued a final rule amending its tip regulations to address these amendments. Key changes include:

  • Tip pools where no tip credit is taken may include employees who do not customarily and regularly receive tips;
  • Employers, managers, and supervisors are expressly prohibited from keeping employee tips;
  • If using a mandatory tip pool, employers must distribute the tips no less often than when they pay wages;
  • There is a new recordkeeping requirement for employers who do not take a tip credit but collect employees’ tips to operate a mandatory tip pool; and
  • Employers may take a tip credit for employee time performing non-tipped duties contemporaneously with their tipped duties, or for a reasonable time immediately before or after performing the tipped duties, thereby eliminating the former 80/20 rule.

This rule was set to take effect March 1, 2021. However, because of the pending regulatory review ordered by the current presidential administration, it is now proposed to take effect May 7, 2021, assuming it passes review. Keep in mind some states have more strict requirements than what is permitted at the federal level. Additionally, there are expected to be legal challenges to the new rule. Continue to look for updates on this developing topic.

Action Items

  1. Review the final rule here.
  2. Review tip pool procedures for compliance.
  3. 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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