By Bernie Siebert
On December 4, 2017, the U. S. Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking regarding the tip credit regulations under the Fair Labor Standards Act. https://www.dol.gov/newsroom/releases/whd/whd20171204 The proposed new regulation will be published today, and will be available for public comment. The purpose of the new regulation is to alter the regulations issued in 2011 concerning tipped employees. Under the FLSA, an employer is permitted to pay tipped employees $2.13 so long as the employee receives in tips an amount equal to at least $5.12 per hour. One of the biggest problems for employers under the 2011 regulation was that the number of employees for whom the employer could claim the tip credit was limited to only employees who directly received tips. Thus “tip pooling” arrangements were limited. Under the new proposed regulation, tip pools can be expanded to include non-tipped employees such as cooks and dishwashers. According to DOL: “This would likely increase the earnings of those employees who are newly added to the tip pool and further incentivize them to provide good customer service.” The proposed regulation would also address the issue of the propriety of an employer retaining tips paid to employees while paying its employees an hourly wage that exceeds the minimum wage. The 2011 regulation prohibited an employer from retaining tips and paying employees at least the minimum wage even when no tip credit was claimed. It should be noted, that the regulation is proposed, not final. Moreover, employers utilizing the tip credit should check local law to make sure they are in compliance with any applicable law, regulation or ordinance.