November 15, 2019

Deadline Approaching for Commentary on DOL’s Proposed Rule to Amend Tip Regulations

The public has until December 8, 2019 to review and comment on the Department of Labor’s (“DOL”) proposed rule to amend federal regulations concerning tipping.  The DOL is the federal agency charged with enforcing the Fair Labor Standards Act (FLSA), requiring covered employers to pay employees the federal minimum wage.

Existing Regulations

Section 3(m) of the FLSA allows covered employers to pay employees less than the federal minimum wage of $7.25[1] but no less than $2.13 per hour[2] and count a limited amount of employees’ tips (no more than $5.12 per hour) as partial credit to make up the difference between the cash wage paid and the minimum wage.  This regulation requires tips to be retained by the employee who earned them. It only allows for tip pooling under certain circumstances.  Employers are not allowed to share tips with employees who do not customarily and regularly receive tips. This rule applies even if the tipped employees are paid the full federal minimum wage.

Proposed Regulations

The proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between traditionally tipped “front of the house” workers (e.g., waitstaff) and non-tipped “back of the house” workers (e.g., dishwashers and cooks).

Besides changing the way tips can be shared, the proposed rule clarifies that an employer may take a tip credit for any amount of time that an employee performs related, non-tipped duties contemporaneously with his or her tipped duties and provides guidance on what makes a non-tipped duty related to a tip-producing duty.  A prior interpretation of the law concerning a tipped worker’s duties prohibited employers from taking a tip credit for a tipped employee who performed tasks such as cleaning and setting tables, toasting bread, and making coffee.  The DOL changed its stance in recent guidance and now seeks to revise the specific regulation.

[1] Michigan’s current minimum wage is $9.45 and will increase to $9.65 on January 1, 2020.

[2] Michigan’s current minimum wage rate for tipped employees is $3.59 and will increase to $3.67 on January 1, 2020.

Attorney Katherine Cser at Kerr Russell Michigan Paid Medical Leave ActKatherine F. Cser focuses her practice on labor and employment issues. She counsels and advises business owners, managers and human resources professionals on a variety of workplace issues. Some of these issues include discrimination, retaliation, wage and hour laws, medical leave laws, among other concerns. Katherine also advises employers on the review and revision of employment policies and counsels on employment decisions. She is an experienced employment law litigator and has represented employers in administrative proceedings and in litigation. In both commercial litigation and employment law matters, Katherine has experience representing both small businesses and large corporations.

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