As discussed in the previous blog, the Department of Labor issued regulations that clarify the 2018 amendments to the Fair Labor Standards Act (FLSA). This is the second of a four-part series on these new regulations. This blog focuses on the amendments relating to Tip Pooling.
PROHIBITION ON EMPLOYERS KEEPING TIPS
As discussed in the last post, the FLSA expressly prohibits all employers from keeping tips from employees. It is a violation of the FLSA when the employer allows managers and supervisors to keep tips earned by employees.
The Regulations guide employer and elaborate on what it means exactly to “keep tips.” The amended regulations explain that employers are permitted to require employees to share tips with other eligible employees to receive tips.
When an employer facilitates a “Tip Pool” (collecting employee tips and redistributing them), the employer must fully and promptly distribute the tips. This means the employer must either:
- fully distribute any tips collected no later than the regular payday for the workweek in which the tips were collected;
- in the event, the pay period covers more than a single workweek, the regular payday for the period in which the workweek ends; or
- if it is impossible to pay on the payday, the tips must be distributed as soon as practicable, after the regular payday.
TRADITIONAL MANDATORY TIP POOLS: Employers That Take a Tip Credit
The regulations clarity the requirements for Mandatory Tip Pools for employers who take the tip credit. (NOTE: See the previous blog for a definition of a tip credit.) When an employer takes the Tip Credit, the employer may:
- Require the employees participate in a mandatory tip pool,
- the Tip Pool may only be comprised of employees who customarily and regularly receive tips; and
- the employer must notify its employees of the required tip pool contribution amount.
It is important to remember that the employer can only take the tip credit for the number of tips each employee actually receives. In other words, if after the distribution of the tips, the employees still do not make the minimum wage, then the employer can only take the tip credit for the number of tips earned by the employees.
Lastly, and perhaps most important, employers who take a tip credit and have mandatory tip pools cannot allow supervisors and managers to participate in the Tip Pool.
NON-TRADITIONAL MANDATORY TIP POOLS: Employers That Do Not Take a Tip Credit
When an employer does not take a Tip Credit, meaning it pays employees the full minimum wage, then it may impose a Mandatory Tip Pool that includes employees who do not “customarily and regularly receive tips.” This means that the tip pool could include dishwashers, cooks, or other employees in the establishment. NOTE: Supervisors and managers cannot participate in this Tip Pool.
Prudent employers with tipped employees will revisit their handbooks to ensure that their wage/payment policies are compliant with these new regulations. Employers may also want to change their wage/payment policy in light of these changes. These new regulations go into effect on March 1, 2021.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing, full-service law firms in the United States. With over 230 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well-positioned to meet dynamic businesses’ needs and the people who own and operate them. Our offices serve individual and corporate clients in South Carolina, North Carolina, Virginia, Washington, DC, Maryland, Delaware, Pennsylvania, New Jersey, and New York.
At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value, and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and efficiently achieving their goals. Offit Kurman represents its clients the better way.
Whatever and wherever your industry, Offit Kurman is the better way to protect your business, preserve your family’s wealth, and resolve your most challenging legal conflicts. At Offit Kurman, we distinguish ourselves by the quality and breadth of our legal services — as well as our unique operational structure, which encourages a culture of collaboration and entrepreneurialism. The same approach that makes our firm attractive to legal practitioners also gives clients access to experienced counsel in every area of the law.
Subscribe and follow us on our Blog, Facebook, Twitter, Instagram, YouTube, and LinkedIn pages. You can also sign up to receive LawMatters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
DELAWARE | MARYLAND | NEW JERSEY | NEW YORK | NORTH CAROLINA | PENNSYLVANIA |SOUTH CAROLINA | VIRGINIA | WASHINGTON, DC