DOL issues guidance on tips

The U.S. Department of Labor, Wage-Hour Division (WHD) has issued a field memorandum clarifying the Department’s approach going forward, until new regulations are proposed, on tips and the tip credit due to the change in the law that was contained in the Consolidated Appropriations Act of 2018 (P.L. 115-141) (see Payroll Management Guide Report Letter 1515/2549, dated March27, 2018).
Employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools. The law prohibits managers and supervisors from participating in tip pools, however, as the law equates such participation with the employers keeping the tips. As an enforcement policy, WHD will use the duties test at 29 C.F.R. § 541.100(a)(2)-(4) to determine whether an employee is a manager or supervisor for purposes of section 3(m).
The law also provides enforcement authority in FLSA sections 16(b) and 16(c) to, among other things, recover all tips unlawfully kept by the employer, in addition to an equal amount in liquidated damages. The law further provides WHD with discretion to impose civil money penalties (CMPs) not to exceed $1,100 when employers unlawfully keep employee tips. In assessing CMPs, WHD will follow its normal procedures, which includes determining whether the violation is repeated or willful.
WHD’s July 20, 2017 non-enforcement policy concerning retention of tips by tipped employees paid the full FLSA minimum wage will not apply to new investigations beginning on or after March 23, 2018. When an investigation covers periods before and after March 23, 2018, and the employee was paid at least the full FLSA minimum wage, violations of section 3(m) may only be cited if they occurred after March 23, 2018. (U.S. Department of Labor, Wage-Hour Division, Field Assistance Bulletin No. 2018-3, April 6, 2018; U.S. Department of Labor, Wage-Hour Division, Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (FLSA), Revised April 2018).)

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