Tipping the Scales: The Tipped Employee Final Rule Not So Final AfterallYou may recall we previously reported on the DOL’s new tipped employee regulations that were set to take effect in March 2021. Well, the DOL, under the new administration, is now hitting pause on that final rule. The Biden DOL has announced that portions of the final rule will take effect on April 30, 2021, while other portions will be delayed and possibly revised pending the department’s review and invitation for comments.

A quick refresher

The final rule changed tip pooling and sharing provisions to allow employers who do not take a tip credit to implement mandatory tip pools that can include employees who do not customarily receive tips, such as dishwashers, cooks, chefs, and custodians.  Additionally, the final rule imposed civil penalties for employers who unlawfully keep or retain employees’ tips. Finally, the final rule did away with the 80/20 rule and sanctions taking a tip credit for any time during which a tipped employee is performing non-tipped duties immediately before or after their tipped duties, i.e., preparing utensils or refilling condiments.

What did the Biden DOL hit “go” on?

As mentioned above, a portion of the final rule will take effect on April 30, 2021 – so, what is getting the green light? In its Notice of Proposed Rulemaking, the DOL indicated that one of the reasons it is taking another pass at the final rule is because “tipped workers are among those hardest hit amid the pandemic…and protecting these essential frontline workers [is] a priority.” So, the current administration’s DOL is getting behind the portion of the rule that would expand the universe of who can participate in a mandatory tip pool if the employer does not take a tip credit. The DOL hopes this will boost those workers’ earnings.

So– as of April 30, if you do not take a tip credit, you may allow dishwashers, cooks, chefs, custodians and other non-tipped employees to participate in and take a cut of the mandatory tip pool. If you do so, you must comply with added recordkeeping obligations and notate which employees receive tips, and the weekly or monthly amount of tips reported by the employee. The other portion of the final rule getting the green light is that employers, managers, and supervisors are prohibited from keeping any tips received by employees.

What did the Biden DOL hit “pause” on?

The DOL issued two new proposed rules related to the Tipped Employee Final Rule. One would delay the effective date of specific provisions of the rule, and the other asks for comments on the substance of certain provisions. The provisions at issue include:

  • Allowing a tip credit for tipped and non-tipped duties performed contemporaneously
  • The imposition of civil penalties for “keeping” an employee’s tips
  • Deciding when a violation is “willful” for the purpose of assessing civil penalties
  • The definition of “managers or supervisors” who will be excluded from keeping tips
  • Required recordkeeping with regard to mandatory tip pools

Comments to the two proposed rules are due by April 14, 2021, and May 24, 2021, respectively. For now, what is clear is that tips are the property of the employee and cannot be kept or retained,  and “back of the house” workers can take part in mandatory tips pools if you do not take a tip credit. What remains to be determined is when civil penalties should be assessed for “keeping” tips, whether a tip credit is appropriate for dual tasks (tipped and non-tipped work performed contemporaneously), and whether the definition of “managers and supervisors” should be amended to reflect that some managers and supervisors perform tipped work and/or receive tips directly from customers. As is often the case with rulemaking by our administrative agencies, we will stay tuned, and you can count on the fact that we will provide an update when this final rule is finally decided.