DOL Issues Updated Rules on Tip Credit and Tip Pools

Last week the U.S.Department of Labor updated the Fair Labor Standards Act regulations covering the federal tip credit, tip pools, employees in fire protection activities, and the sub-minimum wage for employees under age 20. The new rules take effect May 5, 2011.

The tip credit rule allows an employer to pay tipped employees a wage that is less than minimum wage, as long as this sub-minimum wage plus tips amounts to at least minimum wage. The new rule increases the maximum amount an employer can take as a tip credit toward minimum wage from $4.42 per hour to $5.12 per hour. The updated rule also requires employers to provide advance notice of its intent to take the tip credit and how the employer will calculate the tip credit, and requires employers to clearly state that tips are the property of the employee.
The new rules also allow mandatory tip pools without a maximum percentage cap, provided the employer notifies its employees of any required tip pool contribution amount, only take a tip credit for the amount of tips each employee ultimately receives, and does not retain any of the employees’ tips for any other purpose.
The new rules also clarify the definition on an “employee in firefighting activities,” and reaffirm that employers may pay employees under age 20 a sub-minimum wage for the first 90 days of employment under the youth opportunity wage provision.
To see the Code of Federal Regulations explaining the updated regulations, click here.