Buried in its 2,232 pages, the 2017 Omnibus Budget Bill contains a short provision making important amendments to the Fair Labor Standards Act as it relates to tip pooling arrangements. These amendments may have immediate and important ramifications for employers and may require changes to existing tip pooling arrangements in order to remain in compliance with the law.
The Long and Short of It
First, the bill makes it unlawful for employers, including managers and supervisors, to keep any portion of tips received by their employees, regardless of whether or not the employer takes a tip credit. Previously, the FLSA was vague on whether an employer could retain a portion of employee tips when the employer did not take a tip credit (i.e., when the employer paid the employee at least minimum wage not including tips). This update to the law brings the FLSA in line with previous Department of Labor (DOL) regulations that prohibited employers from sharing in employee tips at any time.
The second significant change brought about by the bill is that the FLSA now permits employers to require tipped employees to share their tips with back of house employees when the employer does not take a tip credit. Thus, under the FLSA, employers who pay their tipped employees at least the full federal minimum wage may now require tipped employees such as severs and bartenders to share their tips with employees who are not customarily tipped, such as dishwashers, cooks, and bussers. This amendment invalidates previous DOL regulations prohibiting employers from requiring such tip sharing with non-tipped employees.