Breaking – Tip Pooling Ban Is On The Table For Repeal

Valiant Marketing Rules and Regulations, Tip Reporting

Breaking – Tip Pooling Ban Is On The Table For Repeal

On July 20th, 2017, the federal government released its semi-annual Unified Agenda of Regulatory and Deregulatory Actions. The agenda is meant to provide the public with notice of regulatory actions that the Executive Branch plans on taking in the coming year.

Notably for the hospitality industry, one of the items up for consideration is the Department of Labor’s (DOL) Wage and Hour Division “Tip Regulations Under the Fair Labor Standards Act (FLSA)” Regulation Identifier Number 1235-AA21.

The agenda states as follows: “regulations limit an employer’s ability to use an employee’s tips regardless of whether the employer takes a tip credit under Section 3(m) [of the FLSA] or instead pays the full FLSA minimum wage directly to the employee” and that “the Department will propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.”

The rule under consideration would reverse this position taken in 2011 by the federal government: if an employer does not utilize a tip credit, a tip pool can only include employees that ordinarily and customarily receive tips.  This type of tip pool excludes back-of-house employees such as cooks and dishwashers.  This circumstance has frequently caused issues with employee relations, as back-of-house employees often feel they are not being compensated fairly for their contribution to the total dining experience.

The proposed change has occurred because there are a number of pending lawsuits across the country, in addition to two petitions before the Supreme Court regarding the matter. A Notice of Proposed Rulemaking is expected in August 2017.  Once the notice is officially published, there is a 60-day period open for responses, followed by a 30-day period to review the responses and finalize a ruling.

The Valiant compliance team has been advised by the NY Wage and Hour Office of the DOL that their field agents have been instructed to inform employers that they will not begin any new investigative actions, or act further on any outstanding investigations regarding tip pools for employees being paid directly at or above minimum wage.

Valiant is keeping a sharp eye on this rule consideration and we’ll be sharing regular updates to keep you informed and prepared.