DOL may change Obama-era tip pool rule

The Department of Labor has announced in its semi-annual Uniform Regulatory Agenda that it may scrap a tip-pooling rule enacted by the Obama administration. The existing rule bans using tip pools to share gratuities with workers who traditionally don’t receive tips, such as cooks and dishwashers.

When employers take a tip credit, they can pay employees such as waiters as little as $2.13 per hour instead of the full $7.25 per hour minimum wage as long as tips account for the remainder of the minimum wage.

How tips are distributed has been actively litigated for decades. In fact, two federal circuit courts have recently disagreed on the legality of sharing pooled tips, potentially setting up a Supreme Court case.

In 2011, the Obama administration established this rule:

“Even if the employer does not take a tip credit, tips remain the property of the employee that received them and the employee cannot be required to turn over his or her tips to the employer. Similarly, the employer may not take the employee’s tips to further an invalid tip pool, such as one that includes employees who do not customarily and regularly receive tips, like cooks, janitors, or dishwashers.”

Here’s how the Trump administration’s proposed change would work: For tipped workers such as waiters, those who are paid less than full minimum wage would continue as they do now. They would not be required to share tips with other traditionally untipped staff.

But if an employer chose instead to pay servers the full minimum wage, then the employer could pool any tips received and distribute those pooled tips any way it might choose.

The restaurant industry has sought this proposed change for years as a way to equalize the earnings between front- and back-of-the-house staff.

Labor groups opposed to the move argue that it could allow employers to essentially claim ownership of all tips as long as employees received the minimum wage.

Final note: The Supreme Court is expected to announce sometime in September whether it will address the tip-pooling issue.