DOL Final Tip Credit Rule is Year-End Regulatory Victory for the Restaurant Industry

The National Restaurant Association applauds the Department of Labor (DOL) final rule revising tipping regulations under the Fair Labor Standards Act (FLSA). The Association and its affiliate the Restaurant Legal Center advocated for many of the changes enacted in the final rule which makes tipping regulations more practical and workable for the restaurant industry and – more importantly – brings them into greater alignment with the FLSA.
 
The final rule has two major parts that impact the industry:

• It removes the portions of the regulations that prohibited employers that do not take a tip credit from implementing mandatory “nontraditional” tip pools. This means that employers who do not take a tip credit may pool tips and share with the back-of-house employees.  The final rule does not change the tip pooling requirements for those restaurants that count tips as a part of wages. The final rule also contains safeguards and compliance measures regarding tip pools. Importantly, it explicitly prohibits employers–regardless of whether they take a tip credit–from keeping employees’ tips for any purpose, which includes prohibiting managers and supervisors from keeping tips received by employees. 

• The final rule includes codification of interpretation of the so-called ‘80/20 rule’ that governs how and when tips can be counted as part of an employee’s wages when doing side work. The final rule reflects DOL’s informal guidance that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties.
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“The DOL final rule is a year-end victory for the restaurant industry and its workers after years of litigation,” said Shannon Meade, vice president of Public Policy and Legal Advocacy for the National Restaurant Association. “The changes bring much needed regulatory clarification for the small business owners and their employees about what the law allows and requires. Moreover, it completes the Association’s regulatory agenda to achieve sensible regulations on federal overtime and joint employer standards. At a time when the restaurant industry is faced with instability, this rule provides renewed sensible regulations on tip-pooling and tip-credit standards.”