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On October 25, Elitsa posted on the increase in Florida’s minimum wage to $8.56 an hour, effective January 1.  Because of that increase, Florida employers who take a tip credit must pay tipped employees a direct wage of at least $5.54 per hour.  The U.S. Department of Labor has proposed a new rule regulating tipped employees under the Fair Labor Standards Act.  Here are some highlights of the current requirements and what the proposed rule requires.

The FLSA allows employers that take a tip credit to “tip pool,” i.e., sharing collected tips among multiple workers.  However, employers may only include employees who customarily and regularly receive tips, such as servers, bartenders, and bussers, in the tip pool.  The DOJ’s existing regulations apply these restrictions on mandatory tip pools to all employers, whether or not the employer takes a tip credit under the FLSA. This means cooks and dishwashers may not be part of mandatory tip pools.  The proposed rule on tips will eliminate this restriction for employers that do not take the tip credit and will implement guidance on when an employer can apply the tip credit to “non-serving” work tasks.

The proposed rule will do the following:

  1. Implement a 2018 change in the FLSA that prohibits employers, managers, or supervisors from keeping employees’ tips, including from a tip pool, regardless of whether the employer takes a tip credit under the FLSA.
  2. Remove the regulatory language that imposes restrictions on an employer’s use of employees’ tips when the employer does not take a tip credit. This would allow employers that do not take an FLSA tip credit to include a broader group of workers, such as cooks or dishwashers, in a mandatory tip pool.
  3. Amend the regulations to reflect recent guidance explaining that an employer may take a tip credit for any amount of time that an employee in a tipped occupation performs related non-tipped duties contemporaneously with his or her tipped duties, or for a reasonable time immediately before or after performing the tipped duties. “Related non-tipped duties” include, for example, time a server spends cleaning or setting up the tables he or she serves, making coffee, and toasting bread.  In addition, the proposed rule expands the definition of related non-tipped duties to include tasks listed in the applicable job description of the O*NET.
  4. Require employers that collect cash tips to facilitate a mandatory tip pool to redistribute the tips no less often than when it pays wages, to align the policy for cash tips with the current policy for tips paid via credit card. Employers would not have to distribute cash tips daily.
  5. Require employers that do not take a tip credit to keep records of those employees who receive tips and the tip amounts they receive.

For employers who take a tip credit, the proposed regulations do not change much, other than defining in a more formal manner the “related non-tipped duties” to which they can apply the tip credit.  For those employers that pay a direct wage of at least the minimum wage and do not use the tip credit, the proposed rule provides greater flexibility in who can share in tips.  The proposed rule should also provide these employers relief from minimum wage litigation challenging how they handle their tip pools.