Clarification of New Tip Rule

CONFUSION CONTINUES

As you may recall from our recent tip, the Consolidated Appropriations Act of 2018, signed by the President in March, made changes to the tip rules involving an employer’s ability to require tip pools and regulates tip credits. However, widespread confusion ensued due to its language and practical application for employers.   In light of this confusion, the DOL distributed a bulletin last week, providing guidance for these changes to tip rules under the FLSA.

DOL CLARIFICATIONS

Essentially nullifying Obama-era rules, the DOL clarifies that employers who pay their employees full minimum wage under the FLSA are no longer prohibited from allowing employees who are not customarily tipped, such as dishwashers and cooks, from participating in tip pools. Additionally, employers are prohibited from keeping tips received by their employees, regardless of whether the employer is using a tip credit or not. Along this notion, it prohibits managers and supervisors from participating in tip pools, as participation by these management level positions equates to an employer keeping the employees’ tips, which is also prohibited. With the amount of confusion surrounding these changes is any indication; it is almost certain that additional clarification from the DOL will continue to be provided. Especially since this law was only signed three weeks prior.

MINNESOTA BUCKS FEDERAL TIP RULES

While federal law allows employers to take a tip credit when paying its employees, Minnesota prohibits such a practice. In Minnesota employers are not allowed to count tips received by its employees toward payment of wages to that same employee. Minnesota also prohibits employers from requiring employees to participate in tip pools, which was recently reaffirmed in a lawsuit involving Surly Brewing Company. Last month, Surly settled a $2.5M class-action lawsuit after its practice of requiring employees to participate in a tip pool was found to violate state law. The Surly case stands as a stark reminder to all Minnesota employers that failure to consult and follow Minnesota law regarding tips can cost you in the long run.

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