Labor Department Proposes New Tip Pooling Rule

Labor Department Proposes New Tip Pooling Rule

The US Department of Labor this week announced a proposed change to regulations under the Fair Labor Standards Act concerning tipped employees and employers’ right to demand that they pool their tips. The proposed new rule, according to the department’s press release, “applies where employers pay a full minimum wage and do not take a tip credit and allows sharing tips through a tip pool with employees who do not traditionally receive direct tips–such as restaurant cooks and dish washers.”

Notice of the proposed rule was published in the Federal Register on Tuesday, and will be available for public comment for 30 days. If enacted, the rule change would benefit restaurants, which have come under increasing pressure to pay their tipped employees the standard minimum wage and thus forego the tip credit, making more of them subject to these regulations, Lisa Nagele-Piazza explains at SHRM:

“Restaurants and other food service providers should welcome these proposed changes,” said Kathleen Anderson, an attorney with Barnes & Thornburg in Fort Wayne, Ind., and Columbus, Ohio. “Think about it. The restaurant experience is created by the combined efforts of the front and back of the house. Tip sharing allows those in the back of the house to be rewarded for good service.” …

Employee advocates disagree. “Tips belong to the workers who have earned them—period,” said Christine Owens, executive director at the National Employment Law Project in Washington, D.C. “If companies have trouble retaining nontipped workers because their pay is so low, the solution is for the companies to raise the wages of those workers.”

Opponents of the new rule also fear that it will allow employers not to distribute pooled tips to employees at all, Julia Horowitz reports at CNN Money:

The [National Employment Law Project] pointed to a line in the Labor Department document, which specifically says that managers could use pooled tip money to make structural improvements, like expanding the dining area, or to lower menu prices. “Crucially, the rule doesn’t actually require that employers distribute pooled tips to workers,” said Heidi Shierholz, senior economist at the left-leaning Economic Policy Institute, in a statement.