Tip Credit & Tip Ownership Regulation Changes

The Wage and Hour Division of the Department of Labor published its Final Rule regarding the tip credit and ownership of tips. It published the Final Rule without a notice and comment period. As such, it takes effect immediately. The Final Rule amends previous regulations and requires employers to provide notice to employees in advance of taking the tip credit and additional notice requirements related to tip pool contributions. Moreover, particularly disconcerting is the DOL’s position with respect to tip ownership in cases where employers pay employees full minimum wage in cash and then take the tips and distribute them to other employees (such as back of the house employees). The DOL’s position is directly contrary to a Ninth Circuit court’s decision. The DOL has said that States in the Ninth Circuit can continue to act in accordance with the Ninth Circuit decision, however, that it will enforce its position in States outside of the Ninth Circuit, thereby creating two different interpretations and likely resulting in litigation.

Employers need to carefully review the Final Rule and develop compliance guidelines immediately. Do not hesitate to call me to discuss.

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