DOL Plans to Rescind Tip Pooling Regulations

In late July, the Department of Labor (DOL) announced plans to repeal the 2011 regulations that limited tip pooling under the Fair Labor Standards Act (FLSA), 29 C.F.R. § 531.52 (2011). DOL indicated it will not enforce the old regulations while putting the repeal in place.

The current regulation posits that tips are determined by the customer for a specific employee, thus making that tip property of the rewarded employee. 29 C.F.R. § 531.52 (2011) states, “Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in the furtherance of a valid tip pool.”

FLSA permits tip pools among employees who “customarily and regularly” receive tips, including employees who interact with customers directly like wait staff, bartenders and bussers. This regulation specifically prevents back of house employees like cooks and dishwashers from sharing in the tip pool. Restaurateurs who take advantage of tip credits in the FLSA generally pay their front of house staff a lower wage, allowing tips to make up the difference between wage paid and minimum wage.

This regulation has resulted in several court cases, including one petition filed by the National Restaurant Association before the Supreme Court. While a final decision could be issued as early as this month, be aware that employees still have the right to pursue civil lawsuits in the meantime.

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