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Update on the Tip Credit Final Rule

The U.S. Department of Labor (DOL) announced on April 29, 2021 a Final Rule (“Rule”) delaying portions of the 2020 Tip Final Rule until December 31, 2021. The DOL explained that this delay will provide the agency additional time to conduct another rulemaking to potentially revise that portion of the Rule addressing the application of tip credit provisions to tipped employees who perform both tipped and non-tipped duties.

The remainder of the 2020 Rule became effective on April 30, 2021, as follows:

  • A prohibition on employers, including supervisors and managers, keeping tips received by workers, regardless of whether the employer takes a credit for workers’ tips toward their obligation to pay those workers’ minimum wage.
  • The recordkeeping requirements for an employer that does not take a tip credit to include non-tipped workers, such as cooks and dishwashers, in nontraditional tip-sharing arrangements.
  • An employer that collects tips for tip pools must fully distribute tips no later than the regular payday for the workweek or pay period in which the tips were collected.

The eight-month extension of the effective date for specific portions of the 2020 Rule allows the department time to address additional questions of law, policy and fact and complete separate rulemaking related to the assessment of civil money penalties, and the application of the FLSA’s tip credit provision to tipped employees who also perform non-tipped work.

Next Steps for Employers

The DOL is soliciting public comment on how to improve the Rule’s recordkeeping requirements and the provision that bans managers/supervisors from keeping employees’ tips. Employers may submit comments on the delayed provisions through May 24, 2021 by visiting

HR Works will continue to monitor this legislation and provide updates as new information becomes available.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.