The Trump administration’s Department of Labor (DOL) has proposed a rule that would erase protections for tipped employees if enacted. Under the proposed regulations, employers may require tipped employees to share their hard-earned tips with non-tipped employees as long as the tipped employee is paid at least minimum wage by the employer. For example, if a waiter is paid $10/hour plus tips from his employer, then his employer can require him to share his tips with the kitchen staff.
The proposed rule would still prohibit an employer from taking a tip credit and requiring a tipped employee to share tips with non-tipped employees, i.e. managers and kitchen staff. Under the Fair Labor Standards Act (FLSA), an employer is permitted to take a credit for the tips an employee earns and pay a lower hourly wage if the following conditions are met: (1) the tip credit does not exceed $5.12 per hour (the employer must still pay at least $2.13 per hour in actual wages); (2) the employer gives notice to the employee of the tip credit; and (3) the employee makes sufficient tips to make up the difference between the amount the employer pays and the minimum wage. While tipped employees can be required to share or pool tips with fellow tipped employees, under current DOL regulations they cannot be required to share or pool tips with non-tipped employees.
The DOL claims the new regulations—to only prohibit sharing tips with non-tipped employees when the employer takes a tip credit—are in response to a Circuit split between Federal Courts on whether the current regulation is an accurate application of the requirements of the FLSA. The DOL even asserts that this proposal will benefit tipped employees. Time and again though, courts have found that tip pooling schemes and tip credits generally are prime areas for abuse by employers. Employers frequently improperly include employees in tip pools, improperly calculate tipped employees’ overtime pay, improperly use tips to compensate employees for non-tipped work, pay non-tipped employees with tips, and improperly withhold tips from employees.
If you have any further questions about how tipped employees should be paid, the Wage Authority Group is awaiting your call.
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