Heads up! The DOL wants new rules for tipped employees, including tip pools with the back of the house.

Nan Palmero from San Antonio, TX, USA, CC BY 2.0, via Wikimedia Commons

If you operate a restaurant or other establishment with tipped employees, the odds are that wage and hour laws have not been your top priority in 2020 — as opposed to, say, staying afloat.

It’s been a tough year.

But, with a promising stimulus package on the way and PPP money serving up hope for restaurants, there is some light at the end of the tunnel. And as that light shines brighter, it’s important for restaurants not to run afoul of the Fair Labor Standards Act, which is easier said than done. Between notice requirements, tip credits, and tip pools, there’s a lot that can go wrong.

So, Tuesday, the U.S. Department of Labor proposed a final rule to address tips under the FLSA. But, if you’re not keen on reading 148 pages, the biggest takeaway is that an employer that does not take a tip credit can require employees that traditionally receive tips to share them with other non-managerial employees that traditionally don’t receive tips. In other words, servers will share tips with dishwashers and cooks. Again, you cannot do this if you take a tip credit.

Here’s what else is in store for employers (courtesy of this DOL press release).

Employers can’t keep employee tips — ever!
Tips collected in a tip pool must be shared no less often than when the employer pays wages
updated civil money penalty guidance consistent with recent court rulings
new recordkeeping requirements for employers that do not take a tip credit but collect employees’ tips to operate a mandatory tip pool
No more 80/20 rule
alignment with payment of tipped employees under Executive Order 13658 (Establishing a Minimum Wage for Contractors)

Just remember that certain states and localities in which your business operates may have more employee-friendly rules that could control.

If you have additional questions about the new DOL rule, which will take effect in about 60 days, here are some additional resources:

And, as always, if you have specific wage and hour questions, do not hesitate to contact your outside employment law counsel.