Dive Brief:

• The U.S. Department of Labor (DOL) tomorrow will formally propose to rescind Obama-era regulations that limited employers' tip pooling arrangements, it said in a draft Notice of Proposed Rulemaking (NPRM) on the Federal Register's public inspection page.
• The rules prohibited employers from redistributing gratuities to nontipped employees, even if all workers involved received minimum wage (as opposed to a tipped minimum wage). The rules have faced several legal challenges and the U.S. Supreme Court has been asked to weigh in.
• The NPRM proposes to allow employers to operate tip pools that include nontipped employees, like back-of-house restaurant workers, as long as all workers in the pool are paid minimum wage. Alternatively, if employers want to take a tip credit for servers, for example, the rule will require that they limit any tip-sharing arrangements to tipped employees.

Dive Insight:

The new administration had been eyeing the 2011 tip pool regs for removal from the beginning. The NPRM follows through on this and also asks stakeholders a few final questions, including: "If this proposed rule were adopted as proposed, what kinds of employees would employers choose to include in mandatory tip pools?" and, "If this proposed rule were adopted as proposed, would some employers respond by reallocating tipped income to their non-tipped employees?"

Employers who wish to respond to DOL's request can find instructions for doing so in the NPRM. Comments must be received within 30 days of its expected publication in tomorrow's Federal Register.

Finally, even though DOL is no longer enforcing the still-on-the-books tip pool regs, it may still be risky to include nontipped employees in tip pools. Federal appeals courts are split on the issue and several states have already prohibited such arrangements, with more likely to jump on the bandwagon. 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. But with the NPRM's relatively short comment period, employers may not be waiting too long for some clarity.