DOL Issues Final Rule For Tipped Employees

Volume: 19 | Issue: 78
December 22, 2020

The U.S. Department of Labor (DOL) announced today the publication of a revised regulation on tipped employees that addresses the changes made to Section 3(m) of the Fair Labor Standards Act by the Consolidated Appropriations Act of 2018 (CAA).

The revised regulation removes the prior language that prohibited employers that do not take a tip credit (such as Nevada employers) from implementing mandatory “nontraditional” tip pools—tip pools that include employees who do not customarily and regularly receive tips. It also explicitly prohibits all employers—regardless of whether they take a tip credit—from keeping employees’ tips for any purposes, which includes prohibiting managers and supervisors from keeping tips received by employees.

The revised regulation further requires an employer that collects tips to facilitate a mandatory tip pool to fully redistribute the tips no less often than when it pays wages and incorporates a new recordkeeping requirement for employers that require tip pools.

The regulation becomes effective sixty days after its publication in the Federal Register. The DOL has provided a list of Frequently Asked Questions that may be helpful. As you review these materials, however, remember that Nevada does not permit tip credits. As such, questions or answers addressing tip credits are inapplicable in Nevada.

If you have questions about these changes or need assistance with tip pools 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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