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Spending bill makes it illegal to confiscate employees’ tips

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in Employment Law,Human Resources

Employers won’t be allowed to pocket employees’ tips under the Department of Labor’s controversial proposed tip pooling rule now that President Trump has signed stop-gap spending legislation.

The $1.3 trillion funding agreement—which Trump first threatened to veto but eventually signed in time to avert a government shutdown on March 24—amends the Fair Labor Standards Act to make it illegal for business owners and supervisors to confiscate tips from their employees.

The DOL’s proposed rule would rescind an Obama-era regulation that forbids employers from organizing tip pools to spread a portion of servers’ gratuities to back-of-the-house employees such as cooks and dishwashers. Compulsory tip pooling would be legal as long as employees earn at least the federal minimum wage and employers don’t apply a tip credit, which allows them to pay as little as $2.13 per hour.

Critics protested the tip-pooling rule when it was announced last year, saying it would allow owners and supervisors to simply keep employees’ tips for themselves.

Indeed, internal DOL research—allegedly suppressed by Secretary of Labor Alex Acosta—found that the rule could deprive restaurant servers of $5.8 billion in confiscated tip income every year. News reports said the research was purposely omitted from the DOL’s notice of proposed rule-making issued in December 2017.

Acosta reportedly supports the FLSA amendment attached to the spending bill. It lets employees sue for the value of any confiscated tips, plus damages. It grants enforcement authority to the DOL’s Wage and Hour Division, which could assess civil penalties against violators.

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