Effective November 23, 2021, the Fair Labor Standards Act (FLSA) tip credit regulations are amended to:
- Allow the US Department of Labor (DOL) to assess civil money penalties against employers that unlawfully keep employees’ tips, even if those violations are not repeated or willful;
- Allow employers to require managers and supervisors to contribute to tip pools;
- Allow managers and supervisors to keep tips they receive directly from customers only when those tips are based on the service that they directly and solely provide; and
- Broaden the circumstances under which an employer’s minimum wage and overtime violations can be considered “repeated and willful,” and therefore subject to civil money penalties.
Next Steps for Employers
Employers with tipped employees should become familiar with this Final Rule to ensure that their tip pooling arrangements meet the requirements of the Final Rule, and that managers and supervisors are not participating in these arrangements. Employers should also review and adjust their payroll practices, update any correlating written policies or procedures and ensure these changes are communicated to impacted employees.
In addition, employers must also be mindful of applicable state laws. While the FLSA allows employers with tipped workers to pay as little as $2.13 per hour and take a credit against the tips earned by the employee to make up the balance of the federal minimum wage of $7.25 per hour, many states have higher minimum wage rates and/or laws regarding tipped workers which may differ from the FLSA. Where federal and state laws differ, employers should adhere to the law that is most beneficial to the employee.