U.S. DOL Announces Proposed New Rule on Tip Credits and Pooling

Rules relating to tip credit and pooling have resulted in significant debate among legislators, regulators, and the courts, leading to confusion, further litigation, and, in many cases, substantial liability or settlements involving employers that operate in the hospitality industry.  Today, the U.S. Department of Labor (“DOL”) published proposed rulemaking that aims to bring greater clarity to the morass of tip-related legislation, as well as previous agency rules and interpretations.  I describe below some of the notable elements of these proposed rules.

The proposed rulemaking will codify the DOL’s recent guidance that an employer may take a tip credit for any amount of time an employee in a tip-earning occupation performs related non-tipped duties that are performed contemporaneously with, or within a reasonable time immediately before or after, the tipped duties.  The proposed regulations specifically identify a server’s tasks of cleaning and setting tables, toasting bread, making coffee, and occasionally washing dishes or glasses as related non-tipped duties that qualify as time for which a tip credit may be taken.  In addition to these examples, the proposed rulemaking provides that a non-tipped duty is related to a tip-related occupation if the duty is identified as a task of a tip-producing occupation in the Occupational Information Network (O*Net).  This is distinguishable, however, from work unrelated to the tipped occupation, which would then be considered a “dual job” for which a tip credit cannot be taken.

The proposed new rulemaking also reiterates the provision in the Consolidated Appropriations Act of 2018 that prohibits employers, managers, and supervisors from keeping any tips received by employees.

In addition, the DOL will amend its regulations to remove language imposing restrictions on an employer’s use of tips when the employer does not take a tip credit, meaning that traditional back-of-the-house employees, such as cooks and dishwashers, could participate in a tip pool.  The proposed new rulemaking does not, however, affect current regulations providing that employers who take a tip credit against tipped employees’ wages may maintain a tip pool among only tipped employees and not employees who do not customarily and regularly receive tips.

The comment period for this proposed rulemaking will remain open until December 9, 2019, after which time the DOL will publish and implement a final rule.

I will be sure to update you on the state of this rulemaking as further developments unfold.