U.S. Department of Labor Final Rule Permits Tip Pooling Among Front and Back-of-the-House Hospitality Workers

December 23, 2020 - Yesterday, the U.S. Department of Labor issued its long-awaited Final Rule allowing employers who do not take a tip credit to establish “nontraditional” tip pools that include back-of-the-house employees and others who do not traditionally receive tips. 

The Fair Labor Standards Act generally requires covered employers to pay their employees at least the federal or other applicable minimum wage.  However, it allows an employer which satisfies certain requirements to count a portion of tips received by its “tipped employees” as a credit toward its minimum wage obligation, otherwise referred to as a “tip credit.”

Under the DOL’s new Rule, an employer that elects to pay the applicable minimum wage, rather than take advantage of the subminimum wage allowed for workers who receive tips from customers, is now permitted to establish a "nontraditional" tip pool that includes cooks, dishwashers, and other employees who under the FLSA are ordinarily not permitted to share tips.  

Our client alert provides key takeaways for restaurant employers and other employers in the hospitality industry on the Final Rule.