DOL Issues Additional Tip Rules

Volume: 20 | Issue: 62
September 28, 2021

Remember the Consolidated Appropriations Act of 2018 (CAA) that amended the Fair Labor Standards Act (FLSA) to prohibit supervisors and managers from keeping any portion of employees’ tips and nullified the Department of Labor’s 2011 regulation prohibiting mixed tip pools? Since this law passed, the U.S. Department of Labor (DOL) has been working on new regulations for tipped employees. 

In March of this year, we explained that a portion of those new regulations were going into effect, but that other portions of the regulations would be delayed because the newly elected Biden administration wanted to revise them. Those delayed portions of the regulations are now complete and have been issued by the DOL. They become effective November 23, 2021.

The new regulations first address penalties. They allow civil money penalties against an employer who takes tips earned by their employees regardless of whether the violation is repeated or willful. The regulations also modify the definition of willfulness for penalties generally.

Second, the regulations address in some detail managers and supervisors who receive their own tips. The new regulations clarify that a manager or supervisor may keep tips only when they are received from customers directly for service that the manager or supervisor directly and solely provides. “The final regulations reflect the reality that some managers or supervisors perform work for which they receive tips, while ensuring that managers and supervisors do not keep any portion of other employees’ tips.” Thus, “a manager who serves her own tables may keep her own tips, for example. However, when a manager simply runs food to a table for which a server is otherwise responsible, she may not keep any portion of the tip the customer leaves for the server since that tip was not earned solely by the manager or supervisor.”

The regulations further clarify that while managers and supervisors may not receive tips from mandatory employee tip pools, an employer could require them to contribute all or some of their tips to such a tip pool. However, the DOL declined to amend the regulations to allow mandatory tip pools comprised only of managers and supervisors, explaining: “The FLSA prohibits employers from allowing managers or supervisors to keep other employees’ tips. This includes other managers and supervisors’ tips.” 

If you have questions about tip pools and/or tipped employees, please contact a KZA attorney. 

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.

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