How restaurants treat and pay tipped “front-of-house” employees and “back-of-house” employees who usually don’t receive gratuities may soon change dramatically. On October 7, 2019, the U.S. Department of Labor (DOL) issued proposed rules that would allow restaurants that do not count gratuities as part of an employee’s wages to redistribute those tips among all employees.
The proposed rule aims to implement provisions of the Consolidated Appropriation Act of 2018, which amended portions of the Fair Labor Standards Act (FLSA) that address tipped employees. That 2018 amendment prohibited employers from keeping their employees’ tips “for any purposes, including allowing managers and supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”
A “tip credit” refers to the practice, permitted in several states, of paying employees less than the minimum wage as long as the amount of gratuities the employee receives makes up the difference between the wage they actually receive and the standard minimum wage.
Employers Can Require Pool Tipping If They Don’t Take a Tip Credit
Under the proposed rule, employers who do not take a tip credit will be able to establish a tip pool in which all gratuities received by tipped workers who earn a full minimum wage would be shared with workers who do not typically receive tips, such as cooks, food expeditors, and dishwashers.
At restaurants that do take tip credits, only tipped workers would be allowed to participate in pooling. Employers, including managers and supervisors, would still be barred from receiving any portion of employee tips under any circumstances.
End of the “80/20” Rule
Currently, employers must pay tipped workers like servers and bartenders the full minimum wage (and thus cannot take a tip credit) if non-tipped “side work” exceeds 20 percent of their shift time. These non-tipped duties include activities like refilling condiments, setting tables, rolling silverware, preparing food, cleaning, and other preparations.
Under the proposed regulations, however, employers may take a tip credit for the time that an employee in a tipped occupation performs “related, non-tipped duties contemporaneously with or a reasonable time immediately before or after performing” duties which could earn them gratuities. The DOL will consider a non-tipped duty to be “related” to a tip-producing occupation if the task is listed as a duty of the tip-producing occupation by the Occupational Information Network (O*NET).
Contact the Overtime Pay Attorneys for a Free Consultation to Discuss Any Tip-Pooling Questions or Concerns
Restaurant and hospitality workers know that tips, and how employers and the law treat those tips, play an outsized role in determining how much money they take home. If you are one of these workers and have concerns about how your employer treats your tips or whether they owe you more than what you receive in wages, please call the Overtime Pay Attorneys or contact us online for a free consultation