Let's 'ketchup' on latest DOL guidance for tipped employees

During the Trump administration, the U.S. Department of Labor (DOL) issued guidance governing tipped employees, providing long-awaited clarification on wage and hour issues such as (1) when nontipped employees can share in a mandatory tip pool, (2) what constitutes wrongfully "keeping" an employee's tips, and (3) when employers may take a tip credit. The regulations were originally slated to go into effect on March 1, 2021, but the Biden administration delayed enactment until April 30 so the DOL could review related law, policy, and fact issues.

If the final rule is permitted to take effect, it could have sweeping repercussions for businesses with tipped employees. Accordingly, it's an "egg-cellent" idea for those of you with tipped employees—especially in the food service industry—to review the changes in advance.

Background

The updated regulations focus at least in part on when employers may take a tip credit and the implications of doing so. Therefore, it's important for you to understand what a tip credit is before going further.

The federal minimum wage is currently $7.25 per hour, but employers with "tipped employees" (those who customarily and regularly receive more than $30 per month in tips) can take a "tip credit" toward their minimum wage obligation. If an employer chooses to take a tip credit, it must pay tipped employees at least $2.13 per hour. Then the tips can fill the gap up to the minimum wage.

If the employee doesn't make enough tips to equal out to at least $7.25 per hour, however, the employer must pay the difference. Now, on to the meat and potatoes!