DOL Issues New Tipped Employee Rules under the FLSA

Employment Law

DOL Issues New Tipped Employee Rules under the FLSA

Dec 28, 2020 | Employment Law

As a Court of Appeals panel in Richmond pointed out recently, employer FLSA obligations are simple enough for employees who receive a traditional hourly wage but get far murkier and more complicated in the restaurant industry, where employees typically receive compensation through tips or gratuities and employers are permitted to take a “tip credit” to offset a part of the minimum hourly wage due restaurant employees.

On December 22, 2020, the U.S. DOL announced a final rule clarifying its FLSA regulations governing wages that must be paid to tipped employees. Among other things in the final rule, the DOL:

  • Expressly prohibits employers – regardless of whether they take a tip credit – from keeping any part of employees’ tips, for any purpose.
  • Removed regulatory restrictions that prohibited employers who do not take a tip credit from using expanded mandatory tip pools that include non-traditional employees such as dishwashers and cooks, who had previously been excluded under the rules, while restricting tip pool participation to employees that customarily have received tips – servers and bussers – for employers who do take a tip credit.
  • Mandated that employers who collect employees’ tips to facilitate a mandatory tip pool must redistribute those tips back to the employees no less often than when it pays wages.
  • Further clarified recent DOL guidance explaining under what circumstances an employer may claim a tip credit for time that an employee in a tipped occupation performs related non-tipped duties contemporaneously with tipped duties.

The DOL’s final rule will become effective sixty days after publication in the Federal Register.

If you have questions about, or need assistance with, the new FLSA tipped employee rules, please contact Doug Taylor at (703) 525-4000 or

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.


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