The U.S. Department of Labor (DOL) has released guidance clarifying federal law on tip pooling. The guidance was issued in response to a federal law that amended the federal Fair Labor Standards Act’s (FLSA) tip pooling rules. The DOL guidance states that:
- Employers are prohibited from keeping tips received by their employees, regardless of whether the employer takes a tip credit against the minimum wage for its employees.
- Federal regulations no longer prohibit tip pooling when employers pay tipped employees at least the full federal minimum wage and do not claim a tip credit.
- Employers who pay at least the full federal minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools. However, managers and supervisors are prohibited from participating in tip pools.
Employers should remember that some states have different rules concerning tip pools and tip credits. When there are differences between state and federal laws in this area, the law more favorable to the employee generally applies.
Click here to read the DOL guidance.
For more information on the legal requirements related to tip credits, visit our Tip Credit Rules section.