DOL to Rescind 2011 Rule on Tip Pooling

The U.S. Department of Labor (DOL) has announced plans to rescind a 2011 regulation that restricts employers’ use of tip pools.

The current regulation prevents service-industry employers from requiring servers and other front-of-house staff—captains, bussers, bartenders, etc.—to share tips with back-of-house workers, such as cooks and dishwashers, even when the tipped employees earn the full minimum wage before tips.

Under the Fair Labor Standards Act, “The employer is prohibited from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (‘tip credit’) or in furtherance of a valid tip pool.” To be valid under the 2011 regulation, a tip pool must include only front-of-house staff. If rescinded, service-industry employers will be able to keep and distribute tips in any manner they choose in accordance with relevant state law, so long as front-of-house employees receive at least minimum wage.

Last January, the National Restaurant Association petitioned the U.S. Supreme Court for review of a Ninth Circuit decision holding that the DOL had the authority to issue its 2011 rule. The DOL’s proposed rule rescission, planned for next month, would come just prior to the Trump administration’s September 8 deadline to respond to the restaurant industry’s legal challenge.

As MSEC attorney Dean Harris reported last month, the Tenth Circuit recently issued an opinion at odds with the Ninth Circuit’s decision, holding that unless an employer takes the tip credit, tips are not the property of the server. Instead, an employer may pay at least minimum wage and retain tips.