In 2018, Congress added a provision to the Fair Labor Standards Act prohibiting employers from retaining employee tips or allowing managers or supervisors to participate in a tip pooling arrangement. Today, the U.S. Department of Labor announced a new final regulation in which the DOL asserts authority to penalize employers up to $1,100 per violation of this provision, on top of any back wages owed. Prior rules published by the Trump administration also provided for civil penalties, but only in cases of “repeated and willful” violations. The new rule allows the DOL to pursue penalties even for a first offense and regardless of whether the violation was willful. The rule defines “managers and supervisors” as those employees who meet the duties requirement for the executive exemption, whether or not the employees are paid on a salary basis or actually treated as exempt.
The rule is scheduled to be published in the Federal Register on September 24, 2021, and will take effect 60 days later on November 23, 2021.
The DOL is still working an additional rule that will govern how employers pay tipped workers who spend time on tasks that don’t generate gratuities, such as washing dishes or other “back of the house” functions. In June 2021, the DOL proposed dropping regulations issued by the Trump administration and returning to the longstanding rule that would require businesses to pay tipped workers at least the federal minimum wage for non-tipped activities when those activities take up at least 20% of a worker’s time in a workweek. The DOL is currently reviewing public comments on that proposal and is expected to issue a final rule in the coming months.