Dive Brief:
- The U.S. Department of Labor (DOL) has confirmed to HR Dive that it has begun a new rulemaking process for tip pool regulations, sending a proposal to the White House's Office of Management and Budget (OMB) for review.
- Under President Obama, DOL issued regulations that prohibited employers from setting up arrangements that redistribute gratuities to nontipped employees, even if it pays all workers involved minimum wage (as opposed to taking a tip credit). The rules have faced several legal challenges and the U.S. Supreme Court has been asked to weigh in.
- In its most recent regulatory agenda, however, President Trump's DOL said it planned to "propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly."
Dive Insight:
Based on DOL's statement in its agenda, it seems likely that this latest OMB submission is the beginning of the rulemaking process required to dismantle the Obama-era rules.
As for the Supreme Court case, DOL has received several extensions to file its reply brief, which is supposed to explain why the Court should or shoudn't take up the case. In light of its OMB submission, it seems likely that DOL will tell the Court that it doesn't need to hear the case now that the regs are on their way out.
If DOL makes good on its promise, employers may soon be free to set up tip pools that include nontipped workers, if they pay all involved workers minimum wage. For now, however, it remains risky to do so. Federal appeals courts are split on the issue and several states have already prohibited such arrangements. Moreover, the penalties for noncompliance are steep; once a tip pool is deemed invalid, employers can owe minimum wage, back overtime pay and damages to all employees in the pool.
