DOL Proposed Regulation Allows Tip-Sharing with Non-Tipped Employees

    The United States Department of Labor (“DOL”) has proposed new regulations which would allow employers who do not take a tip credit to open tip pools to non-tipped employees.[1]  Employers use tip credits to pay the tipped minimum wage (an amount lower than federal or state minimum wage) and rely upon the tips employees receive to cover the difference between the employees’ tipped minimum wage and the state or federal minimum wage.  Under current federal law, employers can require tipped employees to pool or share tips only among employees who regularly and customarily receive tips (i.e., servers, bartenders, and bussers).[2]  At the federal level, the current restriction applies regardless of whether the employer claims a tip credit.[3]  The DOL proposal would still prevent employers who use tip credits from pooling tips with non-tipped employees. 

    Proponents of the proposed rule claim it will narrow the pay gap between front-of-the-house and back-of-the-house workers,[4] but opponents believe the rule is equal to theft of employees’ wages.[5]

    The DOL proposed rule would put federal regulations in line with Colorado law. For example, a Colorado employer who pays the $10.20 per hour state minimum wage currently could require tipped employees to pool their tips with non-tipped employees.[6]

    The DOL extended the comment period for its proposed new rule to February 5, 2018 and employers interested in providing comment should do so at:  https://www.regulations.gov/docket?D=WHD-2017-0003.

[1] https://www.federalregister.gov/documents/2017/12/05/2017-25802/tip-regulations-under-the-fair-labor-standards-act-flsa. In July 2017, the DOL announced that it would no longer enforce the Obama-era tip pool regulations. See http://www.rockymountainemployersblog.com/blog/2017/7/27/us-department-of-labor-will-no-longer-enforce-obama-era-tip-pool-regulation

[2] https://www.dol.gov/whd/regs/compliance/whdfs15.htm; 29 C.F.R. § 531.52 (2011).

[3] The difference between the direct wage paid the tipped employee and the statutory minimum wage is known as the “tip credit.” 29 U.S.C. § 203(m). A tip credit allows an employer to count an employee’s tips as part of the employees’ minimum wage. Colorado’s current minimum wage is $10.20 per hour and the tipped minimum wage is $7.18 per hour.  The tip credit is a maximum of $3.02 per hour. 

[4] See Tim Carman, The Trump administration proposes allowing tip-pooling in restaurants. Critics call it stealing workers’ wages, The Washington Post (Dec. 7, 2017), https://www.washingtonpost.com/news/food/wp/2017/12/07/the-trump-administration-proposes-allow-tip-pooling-in-restaurants-critics-call-it-stealing-workers-wages/?utm_term=.5f0f21507555.

[5] Lydia Wheeler, Labor Department extends comment period for tip pooling rule amid backlash, The Hill (Dec. 12, 2017), http://thehill.com/regulation/labor/364495-dol-extends-comment-period-for-tip-pooling-rule-amid-backlash.

[6] See https://www.colorado.gov/pacific/cdle/tipped-employees.