DOL proposes new tip rule

The U.S. Department of Labor has proposed a rule that would allow employers that do not take a “tip credit” to establish a pool to be shared between workers who receive tips and are paid the full minimum wage and employees who traditionally do not receive gratuities, such as dishwashers and cooks.

The proposed rule is designed to help ensure that employees’ tips are not “stolen,” according to DOL Wage and Hour Division Administrator Cheryl Stanton.

The DOL in its announcement explained that the rule, if adopted, would further implementation of the Consolidated Appropriations Act of 2018, which prohibits employers from keeping employees’ tips.

The Fair Labor Standards Act allows an employer to 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.

The requirement that employees must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips. According to the DOL, the proposed rule would not impact regulations providing that employers that take a tip credit may only have a tip pool among traditionally tipped employees.

Rather, the department said the proposal reflects existing guidance that an employer may take a 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 under those circumstances, 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 department published the proposed rule for comment in the Federal Register on Oct. 8. The public has 60 days from the date of publication to comment on the proposed rule.