Seyfarth Synopsis: The Department of Labor’s Wage & Hour Division announced its long-awaited proposed rule related to the FLSA’s tip provisions. The rule would implement statutory changes passed in March 2018; it also would elevate certain WHD policy guidance into regulation.

The legislative changes come from the Tip Income Protection Act, which was passed as part of the Consolidated Appropriations Act of 2018. As we have discussed previously, that provision prohibits employers from “keep[ing]” employees’ tips. The proposed rule would allow employers who do not take a tip credit to establish a tip pool to be shared between workers who receive tips and are paid the full minimum wage and employees that do not traditionally receive tips, such as dishwashers and cooks. According to WHD, its proposal would not impact regulations related to employers who *do* take a tip credit: that tip poll may only include traditionally tipped employees.

The proposed rule also would codify WHD’s opinion letter that an employer may take a tip credit for any amount of time an employee in a tipped occupation performs related non-tipped duties with tipped duties. For the employer to use the tip credit, the employee must perform non-tipped duties contemporaneous with, or within a reasonable time immediately before or after, performing the tipped duties. The proposed regulation also addresses which non-tipped duties are related to a tip-producing occupation, referring to O*NET (an occupational database created under DOL sponsorship), and stating that tasks listed for an occupation in O*NET will be considered as “related” tasks for the purposes of the tip credit.

WHD also proposes to explicitly prohibit employers, managers, and supervisors from keeping tips received by employees and incorporate new civil money penalties that may be imposed when employers unlawfully keep tips.

The comment period runs through December 9, 2019.