DOL’s Tip Rule To Become Effective . . . With Complications

You may remember that at the end of President Trump’s term, the U.S. Department of Labor (DOL) published revised regulations on tipped employees. Those regulations were to go into effect on March 1, 2021 but were frozen by President Biden until April 30, 2021.

The DOL has now announced that a portion of the new regulations will go into effect April 30, but that it wants to delay and change other portions of the regulations. Now that the new regulations have become very complicated, it may be helpful to keep the following in mind.

First, regulations simply interpret a law; they help us know how to apply the law, but they are not the law. The law on tipped employees already changed back in December 2018 with the Consolidated Appropriations Act of 2018 (CAA). This is the law that prohibited supervisors and managers from keeping any portion of employees’ tips and nullified the DOL’s 2011 regulation prohibiting mixed tip pools. The DOL is currently trying to implement new regulations to tell employers and the courts how it thinks these 2018 changes should be applied. (The courts are not required to follow the regulations but often do.)

Second, the portions of the regulations that are delayed and may be changed mainly address tip credits, which are unlawful in Nevada, and civil money penalties. The good news for Nevada employers is that the majority of the regulations that are applicable and important to day-to-day business in Nevada will go into effect on April 30 (specifically 29 C.F.R. 10.28(c), (e)-(f), 29 C.F.R. 516.28(b), and 29 C.F.R. 531.50-531.52, 531.54, 531.55, 531.56(a), (c)-(d), 531.59, 531.60). This includes a provision that clearly permits mixed tip pools: “An employer that pays its tipped employees the full minimum wage and does not take a tip credit may impose a tip pooling arrangement that includes dishwashers, cooks, or other employees in the establishment who are not employed in an occupation in which employees customarily and regularly receive tips. An employer may not participate in such a tip pool and may not include supervisors and managers in the pool.” 29 C.F.R. 531.54(d).

Finally, we are always here to help you with these complicated issues. If you employ tipped employees, we encourage you to review the regulations about to go into effect (identified above) and contact us with your questions. We will keep you posted on developments in this area and are available to address any questions you have about tip pools and tipped employees. 

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.