Alert to the restaurant industry: DOL publishes final rule modifying tip sharing | FordHarrison

On September 23, 2021, the United States Department of Labor (DOL) released its latest tip pooling rule. The rule amends and clarifies certain aspects of a rule previously issued by the Trump administration. Several parts of the Trump administration’s final rule came into effect on April 30, 2021.

An employer who pays his tip employees the full minimum wage and does not take tip credit may impose a tip pooling agreement that includes dishwashers, cooks or other non-practicing employees. a profession in which employees usually and regularly receive tips. An employer cannot receive tips from such a tip pool and cannot allow supervisors and managers to receive tips from the tip pool.

Employers, whether or not they take tip credit, are prohibited from retaining tips received by employees, including allowing managers or supervisors to retain a portion of employee tips.

A manager or supervisor is a person who satisfies the test for the functions of a “manager” employee for the exemption from overtime, that is to say any employee (1) whose main function is to manage the company. or a usually recognized department or subdivision of the enterprise; 2 ° who usually and regularly supervises the work of at least two or more full-time employees or their equivalent; and (3) who has the power to hire or fire other employees, or whose suggestions and recommendations for hiring or firing are given particular weight. The definition also includes as directors or supervisors any natural person who holds at least a 20% good faith stake in the company in which he is employed and who actively participates in its management.

The following provisions have been amended or clarified by the new rule and come into force on November 23, 2021.

An employer is not breaking the law when a manager or supervisor keeps the tips they receive directly from customers based on the service they provide directly and solely.

An employer cannot allow a manager or supervisor to receive tips from employer-mandated tip pools or tip-sharing agreements, but may require a manager or supervisor to contribute tips to such an employer. arrangement.

Under the new rule, employers face penalties of up to $ 1,162 whenever an employer retains employee tips, whether the violation is repeated or intentional.

A penalty of up to $ 2,074 per violation may be imposed on anyone who repeatedly or willfully violates Section 6 (Minimum Wage) or Section 7 (Overtime) of the FLSA. A violation is considered intentional when an employer knew his conduct was prohibited by the FLSA or demonstrated irresponsible disregard for FLSA requirements. Reckless disregard means, among other situations, that an employer should have inquired more about whether its conduct was in accordance with the FLSA and failed to conduct a more adequate investigation. All the facts and circumstances surrounding the violation must be taken into account in determining whether a violation was intentional.

Employers’ net profit

Employers should carefully consider who they allow to tip. A manager or supervisor cannot receive tips from a tip pool. A manager or supervisor can only keep tips that they receive directly from customers based on the service they provide directly and only. Whether the violation is repeated or intentional, employers are subject to penalties for any violation. Employers should also check the applicable requirements of state law. Some state laws do not allow the sharing of tips between employees with and without tips.

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Cecil N. Messick

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