Overview: A recent amendment to the Fair Labor Standards Act (“FLSA”) prohibits employers from keeping employees’ tips, including allowing managers or supervisors to keep any portion of these tips. The amendment also allows for tipped workers (e.g., waiters) to share tips with non-tipped workers (e.g., cooks) as long as the employer does not take a “tip credit.”
Effective Date: March 23, 2018.
Details:
Background
The DOL defines the following:
Tipped employees: employees who customarily and regularly receive more than $30 per month in tips. Tips are the property of the employee.
Tip Credit: the FLSA permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. Thus, the maximum tip credit that an employer can currently claim under the FLSA is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13). Under certain circumstances, an employer may be able to claim an additional overtime tip credit against its overtime obligations.
Recent Legislation
The Consolidated Appropriations Act, 2018 (H.R. 1625) (the “Act) passed by Congress and signed by President Donald Trump on March 23, 2018, amends provisions of the FLSA addressing tip credits and tip pooling.
Specifically, the Act provides that an employer “may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” However, the Act also expressly rescinds portions of the 2011 Department of Labor (“DOL”) regulations that prohibited employers from requiring tipped employees (e.g., servers) to share their tips with traditionally “non-tipped” employees (e.g., cooks). Thus, federal law as it existed prior to the 2011 DOL regulations apply, and tipped and non-tipped workers may share tips, as long as the employer does not take a “tip credit.”
In addition, the Act also provides enforcement authority to, among other things, recover all tips unlawfully kept by the employer, in addition to an equal amount in liquidated damages.
The Act’s impact on the FLSA left open many questions, some of which were answered on April 6, 2018, when the Department of Labor issued Field Assistance Bulletin No. 2018, which can be found at https://www.dol.gov/whd/regs/compliance/whdfs15.pdf.
Call to Action: Employers should review and revise, if necessary, policies and procedures concerning tipped employee withholdings. HR, payroll, and supervisory staff should be trained on the amended requirements. Please contact your Service Team with any questions.