Service industry workers will be able to keep all their gratuities beginning April 30, the U.S. Department of Labor announced on Tuesday.
Former President Donald Trump’s administration issued a final rule amending the Fair Labor Standards Act’s (FLSA) requirements for tipped workers, which was originally scheduled to take effect on March 1. However, President Joe Biden asked federal agencies to freeze proposed and pending regulations to give the new administration time to review pending rules, delaying the tip-sharing rule until April 30.
The DOL announced that upon its considerable review, the following portions of the final rule will take effect on April 30:
- A provision prohibiting employers, including supervisors and managers, keeping tips received by workers, regardless of whether the employer takes a tip credit. This prohibition establishes significant protections for tipped employees.
- The ability of an employer that does not take a tip credit to include non-tipped workers, such as cooks and dishwashers, in nontraditional tip-sharing agreements and, by doing so, boost their earnings.
Under the FLSA, restaurants and other hospitality employers may be eligible to take a tip credit, meaning they can pay tipped workers (such as servers and bartenders) less than the standard minimum wage, as long as workers’ tips make up the difference.
“Tipped workers are among those hardest hit amid the pandemic, and the Wage and Hour Division has made protecting these essential front-line workers a priority,” said Jessica Looman, the DOL's Wage and Hour Division deputy administrator. “These essential workers deserve our careful and thoughtful consideration as we craft and implement rules that affect their well-being.”
The final rule's record-keeping requirements will also take effect. However, the DOL is proposing two new rules to replace other portions of the prior administration's rule. Those two proposed rules are:
- A proposal to withdraw and re-propose portions of the rule that narrow the circumstances in which the department can assess civil money penalties for violations. The DOL is also seeking comments on whether to revise the portion of the 2020 final rule that addresses “managers or supervisors” to better understand those who also engage in tipped work.
- A proposal to extend further the effective date of three portions of the final rule to Dec. 31, 2021. They are two portions that address the assessment of civil money penalties and the portion of the final rule that addresses the application of the FLSA tip credit to tipped employees who perform both tipped and non-tipped duties (i.e., dual jobs). The additional eight-month extension would provide the department the opportunity to evaluate additional information about the questions of law, policy and fact raised by these portions of the 2020 Tips final rule.
“The proposed delay and revisions to these provisions further underscore that the Biden DOL is likely to regulate aggressively and, where possible, reverse policy decisions made by the prior administration,” noted Littler Mendelson P.C.
About the Author
Brett Christie is the managing editor of Workspan Daily.