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Under new regulation, workers who make tips may have to share with other staff

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Posted at 3:13 PM, Dec 23, 2020
and last updated 2020-12-23 16:13:07-05

Employers may soon be able to require workers who make tips to share that money with other staff. It's part of a new regulation from the Department of Labor.

The agency says the rule could help increase pay for back of house staff, like cooks and dishwashers who have historically been excluded from tip pools.

The rule says pooling is only allowed if the tipped employee makes the full federal minimum wage.

Federal law allows tipped workers to make $2.13 an hour, as long as they earn enough tips to match the minimum. State laws vary on that point, though.

The rule also gets rid of a guideline that said tipped workers must spend at least 80% of their time doing tasks that earn them gratuity.

The National Restaurant Association has praised the rule, calling it a win for the industry because it clarifies laws under the Fair Labor Standards Act.

“Today’s Department of Labor (DOL) final rule revising tipping regulations under the Fair Labor Standards Act (FLSA) is a year-end victory for the restaurant industry and its workers after years of litigation," said the National Restaurant Association in a statement. "The changes in this rule bring much needed regulatory clarification for the small business owners and their employees about what the law allows and requires. At a time when the restaurant industry is faced with instability, this rule provides renewed sensible regulations on tip-pooling and tip-credit standards.”

We spoke to an employment attorney named Louis Pechman who founded WaiterPay.com. He said there may be some clarification in the rule, but that's not the big issue.

“Tips traditionally have been viewed by management as kryptonite. Don't touch the tips, servers' tips, stay away. That's my money. Now you have a whole situation where servers, it's my money. The tip was left for me. Why am I paying a cook in the kitchen?” said Pechman.

The Economic Policy Institute has estimated the rule would let employers take $700 million from tipped workers each year. That's based on numbers before the industry suffered under the pandemic.

As Pechman points out, some local laws are very protective of employee tips and will supersede federal regulations.

“So, it's important if you're analyzing the issue, is there a state regulation, is there a city regulation which gives more protection to workers than the FLSA does?” asked Pechman.

The rule is set to go into effect in 60 days. The Biden administration could still delay it and create its own rule.