Department of Labor issues new rules on tipped employees

A new final rule from the Department of Labor (DOL) makes it clear how employers should handle their workers’ tips.

The rule, which amends the Fair Labor Standards Act, specifically makes two things clear:

• Employers aren’t allowed to keep these tips under any circumstances, and
• Managers and supervisors can’t receive any portion of employees’ tips, either.

Changes to tip-pooling, too

Another key change in the rule? Tip pooling.

In the past, employers that didn’t take a tip credit couldn’t create mandatory non-traditional tip pools that also included employees who typically don’t receive tips (e.g., dishwashers).

Now, the DOL has removed these restrictions. Note: You do have a new recordkeeping requirement for any employer who establishes this tip pool.

And if your company collects tips for a mandatory tip pool, you must now distribute these tips no less frequently than when you pay wages.

State law can still trump new tip rules

As you get up to speed on these new rules, remember to review your state and local requirements for tipped employees.

Some areas may have more restrictive rules than these new ones set out by the DOL. They can cover anything from an employer’s ability to claim a tip credit, use tips, or set up a mandatory tip pool. 

The feds made it clear: The new DOL rules don’t preempt any state or local laws. You’re still bound to them.