Fair Labor Standards Act Allows Tip Sharing between Tipped and Non-Tipped Employees
05/03/18
Author: ADP Admin/Tuesday, May 1, 2018/Categories: Bulletin News, Compliance Corner
The Department of Labor (DOL) defines the following:
- Tipped employees: employees who customarily and regularly receive more than $30 per month in tips. Tips are the property of the employee.
- Tip Credit: an employer credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. The maximum tip credit that an employer can currently claim under the FLSA is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13). Under certain circumstances, an employer may be able to claim an additional overtime tip credit against its overtime obligations.
The Consolidated Appropriations Act, 2018 (H.R. 1625) (the “Act”), signed into law on March 23, 2018, amends provisions of the FLSA that address tip credits and tip pooling. Specifically, the Act prohibits an employer from keeping “tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” The Act also expressly rescinds portions of the 2011 DOL regulations that prohibited employers from requiring tipped employees (e.g., servers) to share their tips with traditionally “non-tipped” employees (e.g., cooks). Thus, federal law as it existed prior to the 2011 DOL regulations now applies, and tipped and non-tipped workers may share tips, as long as the employer does not take a “tip credit.”
The Act’s impact on the FLSA left open many questions, some of which were answered on April 6, 2018, when the Department of Labor issued Field Assistance Bulletin No. 2018.
Coverage: Employers with tipped employees.
Effective: Currently in effect (March 23, 2018)
Action Required: You should familiarize yourself with the new requirements and contact your HR Business Partner or Payroll Service Representative if you have any questions.
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