Tucked away in the $1.3 trillion omnibus spending bill enacted last week was an amendment to the Fair Labor Standards Act (FLSA) regarding the issue of tip pooling. The amendment provides that an employer “may not keep tips received by its employees for any purposes” but does allow sharing tips with non-tipped co-workers.
According to attorneys Jeffrey Brecher, Eric Magnus, and Noel Trip of Jackson Lewis, the amendment makes it clear that employers, managers and supervisors cannot keep employee tips, although it fails to define the terms manager and supervisor. However, it does allow employers to require traditionally tipped employees, such as food servers, to share their tips with traditionally non-tipped employees, such as cooks. This applies as long as the tipped employees are paid at least the full minimum wage.
A violation would subject the employer to a civil penalty of up to $1,100 for each such violation as well as liability for individual employees. If the employer retains tips and takes a tip credit, the penalty also includes loss of the tip credit.
The tipping rules have followed a complicated legal path between a 2010 court case Cumbie v. Woody Woo, Inc., and new rules from the U.S. Department of Labor in 2011.
The Jackson Lewis lawyers sum it up this way:
“The amendment to the FLSA establishes a compromise between the Cumbie rule advocated for by employers and the Obama Administration’s 2011 Rule: It permits tip splitting among and with non-supervisory, non-service employees where no tip credit is taken, but otherwise forbids distribution of tips to such employees when a tip credit is taken, and categorically bans retention of tips by an employer, manager, or supervisor under either scenario.”