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HR Update: U.S. Department of Labor Announces Partial Effective Date of the Tip Final Rule

By May 4, 2021 No Comments

On February 26, 2021, the Department of Labor delayed implementing the Tip Final Rule which was set to take effect on March 1, 2021.  On April 28th, they announced that several provisions of that Final Tip Rule would go into effect on April 30, 2021.  They include:

Eligible Employees

1.) Employers may mandate a nontraditional tip pool that includes both tipped and nontipped (such as cooks and dishwashers) employees, provided that:

(a). The pool does not include any employers, managers, or supervisors; and
(b). The employer pays the tipped employees the full minimum wage without applying a tip credit.

Tip Distribution

1.) An employer may exert control over tips in a tip pool only to promptly distribute tips to the covered employees on the regular payday or, in certain cases, as soon as practicable after the regular payday.

Record Keeping

1.) Any employer that collects tips received by employees to operate a mandatory tip-pooling or tip-sharing arrangement must also:

(a). Use a symbol, letter, or other notation placed on the pay records identifying each employee who receive tips; and
(b). Keep a weekly or monthly amount reported by the employee, to the employer, of tips received (this may consist of reports made by the employees to the employer on IRS Form 4070).

The provisions of the 2020 Final Rule that address the assessment of civil money penalties and the FLSA’s tip credit for employees who preform both tipped and non-tipped duties remain delayed until December 31, 2021. 

Link to the DOL’s Tip Regulations Final Rule webpage can be found here

*The information provided in this communication is general in nature and is for informational purposes only. It should not be construed as legal, tax, or accounting advice.  

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