Tip Regulations Under the Fair Labor Standards Act (FLSA)

I can hardly believe this

Why? If tipped workers don’t like it they can get a real job.

You think that a job that gets tips isn’t a real job?

Go look in a Las Vegas employee parking lot and get back to us. There are places where you wouldn’t want to work. Like graveyard shift at waffle house.

So beyond all of the analysis, here are the bottom-line changes:

29 CFR §531.52:
- Current:
  A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him. It is to be distinguished from payment of a charge, if any, made for the service. Whether a tip is to be given, and its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient of the gratuity. Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee's tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool. Only tips actually received by an employee as money belonging to the employee may be counted in determining whether the person is a “tipped employee” within the meaning of the Act and in applying the provisions of section 3(m) which govern wage credits for tips.
- Proposed:
  A tip is a sum presented by a customer as a gift or gratuity in recognition of some service performed for him. It is to be distinguished from payment of a charge, if any, made for the service. Whether a tip is to be given, and its amount, are matters determined solely by the customer, who has the right to determine who shall be the recipient of the gratuity. An employer that takes a tip credit is prohibited from using an employee's tips for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool. Only tips actually received by an employee as money belonging to the employee may be counted in determining whether the person is a “tipped employee” within the meaning of the Act and in applying the provisions of section 3(m) which govern wage credits for tips.
  
  NB: it appears the change is the deletion of the sentence, Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA.
29 CFR §531.54:
- Current:
  Where employees practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts retained by the waiters and those given the busboys are considered tips of the individuals who retain them, in applying the provisions of section 3(m) and 3(t). Similarly, where an accounting is made to an employer for his information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his own are counted as his tips for purposes of the Act. Section 3(m) does not impose a maximum contribution percentage on valid mandatory tip pools, which can only include those employees who customarily and regularly receive tips. However, an employer must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees' tips for any other purpose.
- Proposed:
  Where employees practice tip splitting, as where waiters give a portion of their tips to the busboys, both the amounts retained by the waiters and those given the busboys are considered tips of the individuals who retain them, in applying the provisions of section 3(m) and 3(t). Similarly, where an accounting is made to an employer for his information only or in furtherance of a pooling arrangement whereby the employer redistributes the tips to the employees upon some basis to which they have mutually agreed among themselves, the amounts received and retained by each individual as his own are counted as his tips for purposes of the Act. Section 3(m) does not impose a maximum contribution percentage on valid mandatory tip pools, which can only include those employees who customarily and regularly receive tips. However, an employer that takes a tip credit must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees' tips for any other purpose.
29 CFR §531.59:
- Current:
  (a) In determining compliance with the wage payment requirements of the Act, under the provisions of section 3(m) the amount paid to a tipped employee by an employer is increased on account of tips by an amount equal to the formula set forth in the statute (minimum wage required by section 6(a)(1) of the Act minus $2.13), provided that the employer satisfies all the requirements of section 3(m). This tip credit is in addition to any credit for board, lodging, or other facilities which may be allowable under section 3(m).
  (b) As indicated in § 531.51, the tip credit may be taken only for hours worked by the employee in an occupation in which the employee qualifies as a “tipped employee.” Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer's use of the tip credit of the provisions of section 3(m) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section. The credit allowed on account of tips may be less than that permitted by statute (minimum wage required by section 6(a)(1) minus $2.13); it cannot be more. In order for the employer to claim the maximum tip credit, the employer must demonstrate that the employee received at least that amount in actual tips. If the employee received less than the maximum tip credit amount in tips, the employer is required to pay the balance so that the employee receives at least the minimum wage with the defined combination of wages and tips. With the exception of tips contributed to a valid tip pool as described in § 531.54, the tip credit provisions of section 3(m) also require employers to permit employees to retain all tips received by the employee.
- Proposed:
  (a) In determining compliance with the wage payment requirements of the Act, under the provisions of section 3(m) the amount paid to a tipped employee by an employer is increased on account of tips by an amount equal to the formula set forth in the statute (minimum wage required by section 6(a)(1) of the Act minus $2.13), provided that the employer satisfies all the requirements of section 3(m). This tip credit is in addition to any credit for board, lodging, or other facilities which may be allowable under section 3(m).
  (b) As indicated in § 531.51, the tip credit may be taken only for hours worked by the employee in an occupation in which the employee qualifies as a “tipped employee.” Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer's use of the tip credit of the provisions of section 3(m) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section. The credit allowed on account of tips may be less than that permitted by statute (minimum wage required by section 6(a)(1) minus $2.13); it cannot be more. In order for the employer to claim the maximum tip credit, the employer must demonstrate that the employee received at least that amount in actual tips. If the employee received less than the maximum tip credit amount in tips, the employer is required to pay the balance so that the employee receives at least the minimum wage with the defined combination of wages and tips. With the exception of tips contributed to a valid tip pool as described in § 531.54, the tip credit provisions of section 3(m) also require employers that take a tip credit to permit employees to retain all tips received by the employee.

So it appears that an employer will be able to keep tips if the employer pays the tipped staff at least a full minimum wage.

Bottom line: if I was a waiter, I would not deal with this situation well (nor, frankly, would I ever deal with tip pooling well, but that's a different subject).

As a customer, I would want to know if the tip goes to the waiter/waitress I'm tipping or if it goes to the owner. As long as there is full disclosure to the person who gives the tip, I'm OK with it.

(If the tip goes to the owner, I would end up changing my behavior as a customer...slipping the tip to the waiter/waitress in cash, quietly)

From what I have seem being married to a waitress she would have get paid at least 3 times what the minimum wage is an hour to make of for her tips.

My reading of this is that it pertains to employers who pay a cash wage of at least the federal minimum wage and therefore does not utilize a tip credit (using part of the worker’s tips to bring them up to the federal minimum wage if their cash wage is less) and the current rules regarding tip pooling.

Employers who pay less than the federal minimum wage and utilize a tip credit to make up the difference are subject to special rules regarding tip pooling. Traditionally all tips belong to the service facing work (servers, bartenders, bussers) and the employer cannot force them to share their tips with back of house workers (cooks, dishwashers, etc.) unless they enter into that tip sharing agreement voluntarily. Furthermore, if there is a tip pooling arrangement, only that portion of the tip the server actually receives can be counted toward a tip credit. A 2011 regulation extended the regulation regarding tip pooling to include employers who, either because they choose to or because state minimum wage laws require it, pay servers at least the federal minimum wage.

Under the proposed DOL rule change, an employer with tipped workers who pays them a cash wage of at least the federal minimum, can determine that the tips the servers receive are no longer the property of the server and can distribute them amongst all workers as they see fit, or even for management to keep all or a portion of them.

This article does a fairly good job of explaining the proposed rule change and the pro and cons of it from several different perspectives.

https://www.eater.com/2017/12/5/16708374/tipping-laws-trump-department-of-labor-changes

This is very stupid (and wrong) and it’s going to backfire big time on Trump.

Thanks for that link! Very informative, and the devil is in the details. This is addressing a plethora of problems created by the minimum wage. If this reg raises a stink, I say good. This is a fight worth picking.

FWIW I always tip in cash. I also try to avoid places that pool tips - which is becoming harder and harder to do.

From what I have seem being married to a waitress she would have get paid at least 3 times what the minimum wage is an hour to make of for her tips.

Because that's what her employer allows her to make. With this regulation change, the Trump Administration is rightly allowing her employer to keep the tips or use them to pay salaries for other workers if it's beyond what they want to pay her. If she doesn't like that, she can negotiate a better deal, work elsewhere or choose another career.

You think that a job that gets tips isn’t a real job?

If you don't like capitalism, move to Cuba or vote for Democrats. Employers should be able to opt for whatever compensation arrangement they want with their employees - Trump is 100% right on this.