DOL withdraws opinion letter expanding tip pools

Update: Jan. 27, 2021: DOL withdrew FLSA2021-4, the letter concerning tip pools, Jan. 26, along with two other letters issued during the Trump administration's final days. "These letters were issued prematurely because they are based on rules that have not gone into effect," the agency's Wage and Hour Division said, and "may not be relied upon as statements of agency policy."

Dive Brief:

The U.S. Department of Labor (DOL) Jan. 15 issued two opinion letters that address Fair Labor Standards Act (FLSA) compliance for restaurants.
The first letter, FLSA2021-4, said that for now, an employer may not maintain a tip pool that includes both tipped employees for whom it takes a tip credit and nontipped employees. Employers may soon implement pools including both tipped and nontipped employees if certain conditions are met, however, because of regulations scheduled to take effect in just a few weeks.
The second letter, FLSA2021-5, explained how to calculate overtime pay under the FLSA when a tipped employee works as both a server and bartender and also receives tips and automatic gratuities.

Dive Insight:

DOL's opinion letters are fact-specific responses to employer inquiries. The opinion letters are limited in scope to the particular issues addressed and can serve as an affirmative defense in case a lawsuit is filed. The Obama administration discontinued the letters in 2010 in favor of "administrator interpretations" that were more broadly applicable but the department returned to opinion letters in 2017.

Under rules in place since 2011, tip pools that included non-tipped employees were prohibited, even if employers also paid all workers involved minimum wage. Late last year, former President Donald Trump's DOL reversed that position and moved to permit employers that do not take a tip credit to create tip pools that include employees who do not customarily and regularly receive tips. The change will take effect March 1 if not halted during the early days of President Joe Biden's administration.

The new rule also described recordkeeping requirements, set deadlines for tip pool payouts and implemented legislation passed in 2018 that forbids managers and employers from taking gratuities meant for employees.