DOL Issues Proposed Ruling To Change Tip Pooling Regulations

The Department of Labor (DOL) announced today it will issue a Notice of Proposed Rulemaking regarding tip pooling regulations under the Fair Labor Standards Act (FLSA). The FLSA currently allows for tip pooling among directly tipped employees only, such as servers, bartenders, and hosts. The Notice of Proposed Rulemaking would allow employers not claiming a tip credit or using servers' tips as a portion of their income to include indirectly tipped employees, such as cooks and dishwashers, in their tip pools.

This proposed rule is the result of a long legal battle between the DOL and several restaurant interest groups, including the National Restaurant Association and the Oregon Restaurant and Lodging Association (ORLA). The current tip pooling rule has been widely interpreted to apply only to employers using tips in addition to hourly wages to arrive at the federal or applicable state minimum hourly wage rate. Some states, such as Oregon and Washington, do not allow this tips to minimum practice and instead require employers to pay their employees at least minimum wage for all hours worked in addition to the tips they receive.

The legal battle started in the 9th Circuit court in 2010 and after several years of back and forth decisions by lower courts, finally made its way to the Supreme Court in early 2017. In July, the DOL announced its intention to issue a Notice of Proposed Rulemaking to clarify the law, prompting the Supreme Court to postpone its review of the case to allow the DOL to resolve the issue itself.

The Notice of Proposed Rulemaking will be officially released tomorrow, December 5, 2017. The public has 30 days to provide comments on the proposed ruling. The official notice and link to the comment page can be found on the Proposed Rule website.