The U.S. Department of Labor announced a proposed rule for tip provisions of the Fair Labor Standards Act (FLSA) implementing provisions of the Consolidated Appropriations Act of 2018 (CAA). The proposal would also codify existing Wage and Hour Division (WHD) guidance into a rule.

The CAA prohibits employers from keeping employees’ tips. During the development of those provisions, the Department provided technical assistance to Members of Congress. The Department’s proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks.

The proposed rule would not impact regulations providing that employers who take a tip credit may only have a tip pool among traditionally tipped employees. An employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (currently $2.13 per hour) and the federal minimum wage. Establishments utilizing a tip credit may only have a tip pool among traditionally tipped employees.

Additionally, the proposed rule reflects the Department’s guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties with tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties. The proposed regulation also addresses which non-tipped duties are related to a tip-producing occupation.

“The proposed rule shows the Department’s commitment to ensure that employees’ tips are not stolen,” said Wage and Hour Administrator Cheryl Stanton. “This proposal offers a clear pathway for both employers and employees to legally operate a tip pool. The Department is also seeking to add further guidelines in order to complement congressional action and solidify current guidance with the benefit of public input through notice and comment rulemaking.”

This NPRM is available for review and public comment for 60 days. The Department encourages interested parties to submit comments on the proposed rule. The NPRM, along with the procedures for submitting comments, can be found at the WHD’s Proposed Rule website.

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