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By: Michael M. Hill
We previously have written about the “tip credit” provision under the Fair Labor Standards Act and the developing circuit split regarding whether an employee’s tips belong to the employee or the employer. Since 2011, the U.S. Department of Labor (“DOL”) has taken the view that an employee’s tips are the employee’s property, whether or not the employer takes advantage of the tip credit or pays the full federal minimum wage in direct wages.
The DOL’s position on employee tips may soon change. The DOL has announced it soon will issue a Notice of Proposed Rulemaking that will propose to rescind the 2011 restrictions at least in part. Moreover, the DOL reportedly has instructed its investigators nationwide not to enforce this regulation with regard to employers’ tip-pooling policies.
We will keep monitoring this issue and provide an update when the Notice of Proposed Rulemaking is issued. For now, however, employers should be aware that the 2011 regulation regarding tip-pooling still is on the books. Thus, even though DOL investigators may not be enforcing it, individual employees still may bring claims based on this regulation. As always, employers should make sure their policies regarding tips comply with the interpretation of federal law in their circuit, as well as with the applicable compensation laws of their state.
If you have any questions or would like more information, please contact Michael M. Hill at [email protected].