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Rules relating to tip credit and pooling have resulted in a significant amount litigation in the hospitality industry, and, in many cases, substantial liability or settlements. Yesterday, the U.S. Department of Labor (“DOL”) announced its new final rule that revises current regulations pertaining to tipped employees. The final rule specifically addresses tipped occupations that qualify for application of a tip credit, as well as permissible and impermissible tip pooling practices.
Allowance of Tip Credit for Tasks Related to Tip-Producing Occupations
The final rule codifies the DOL’s previous guidance that employers may take a tip credit for any amount of time an employee in a tip-earning occupation performs related to non-tipped duties performed contemporaneous with, or within a reasonable time immediately before or after, the tipped duties. The final rule identifies certain front-of-the-house tasks, including cleaning and setting tables, making coffee, and occasionally washing dishes or glasses as related non-tipped duties that qualify as time for which a tip credit may be taken. In addition to these examples, the final rule provides that a non-tipped duty is related to a tip-related occupation if the duty is identified as a task of a tip-producing occupation in the Occupational Information Network (O*Net). This is distinguishable, however, from work unrelated to the tipped occupation, which would then be considered a “dual job” for which a tip credit could not be taken by an employer.