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U.S. Labor Department Proposes Rules to Expand Use of Tip Pools

    Client Alerts
  • October 14, 2019

Last year, Congress amended the Fair Labor Standards Act to clarify circumstances under which employers can require employees who receive tips to share (or pool) those gratuities with other employees. Last Tuesday, the Department of Labor released proposed regulations that would implement these new tip pooling guidelines.

The rules codify changes to the law that allow employers that pay tipped employees the full federal minimum wage to require tip pooling with other tipped employees, as well as those workers who may not traditionally receive tips, such as cooks or bussers in restaurants. If the employer claims the federal tip credit to pay the alternative minimum wage ($2.13) for tipped workers, the tip pooling arrangement can only be shared by employees who traditionally receive tips, such as servers, hosts, and bartenders. Under either arrangement, managers and supervisors are prohibited from participating in the tip pool, and the employer may not claim any portion of the tips. 

The proposed regulations also relax existing rules regarding the amount of non-tipped duties worked by an employee paid under the tip credit arrangement. If the non-tipped duties are related to the tipped ones, and occur close in time to the tipped activities, the employer may continue to claim the tip credit for all time worked. The rules eliminate any percentage of time worked calculation.
DOL is accepting comments on the proposed regulations through December 9. North Carolina employers should remember that state law restricts any tip pooling arrangement to a maximum of 15 percent of gratuities received by the server.