Summary
On January 26, 2021, the U.S. Department of Labor (DOL) suspended a Final Rule on tipped employees that it previously had announced on December 22, 2020. The Final Rule clarified tip pooling for employees in the food service and hospitality industry, as well as how the tip credit applied to employees who perform both tipped and non-tipped duties.
The Upshot
- As discussed in our prior alert, the Final Rule, originally issued under former President Trump’s administration, would have given employers more latitude in structuring their pay practices if they did not take a tip credit and otherwise paid the federal minimum wage.
- The Final Rule would have taken effect on March 1, 2021.
- The Final Rule is now under review by the Biden administration.
- President Biden has publicly announced his desire to eliminate the tip credit, which puts the future of this Final Rule in question.
The Bottom Line
Under President Biden, we expect the continued rollback of Trump-era changes. The Biden administration may seek to implement aspects of its agenda through new rulemaking, including rules that affect employers’ tip practices. Employers should closely monitor developments in this area in the coming months. Attorneys in Ballard Spahr’s Labor and Employment Group regularly assist food service and hospitality organizations with wage and hour issues and will continue to follow this topic and provide updates on any developments.
