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DOL proposes new tip-pooling rules to benefit back-of-the-house staff

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in Employment Law,Human Resources

The U.S. Department of Labor has announced a proposed rule affecting Fair Labor Standards Act tip regulations that would give employers more options for sharing tips among more employees.

The proposed rule would allow employers to require tipped employees to pool their tips to be shared with employees who do not traditionally receive direct tips, such as restaurant cooks and dishwashers. These “back of the house” employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers.

The proposal would help decrease wage disparities between tipped and nontipped workers—an option that is currently restricted by a rule promulgated in 2011 that has been challenged in a number of courts.

The DOL’s proposal only applies where employers pay a full minimum wage and do not take a tip credit. The proposal would not affect current rules applicable to employers that claim a tip credit under the FLSA.

Learn more about the proposed rule (and how to submit comments on it through Jan. 3, 2018) at www.dol.gov/WHD/flsa/tipcreditnprm.htm.

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Ana February 3, 2018 at 5:51 pm

This short sighted legislation is going to cost local governments and the federal government billions of dollars in lost tax revenue. Right now servers pay taxes on both their salary and tips. If they are only receiving a salary and no longer paying tax on tips, that is going to cause a loss in taxes to the government. For example, if a server makes $600.00 a week in pay and tips, and then is just given a salary at minimum wage instead (a potential 50% decrease or more) how is paying taxes on just $300.00 a week going to bring in more taxes than if the server paid taxes on $600.00 a week? It’s not, and the DOL says nothing about how the taxes for the tips are going to be collected from restaurant owners who take the tips from their servers. I suspect restaurant owners will just bundle those tips in with their business, using them to make payroll, renovations, or their own personal expenses, and then take tax write-offs for business expenses, which will negate any taxes that should be received by the government for those tips.

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