Epps & Coulson Logo


The U.S. Department of Labor (“DOL”), at the federal level, enforces employee rights and has the ability to fine employers who do not abide by employment laws.  The fines stack up and can be large.  The DOL interprets laws, like those in the Fair Labor Standards Act (“FLSA”), which laws may be vague, including in this instance, ones that address the question of when/how tips can be shared and issues rules for enforcement.  The DOL just issued its interpretation (“Final Rule”) on Tip Sharing, providing, that employers can pay tipped workers (waiter/waitresses, bartenders, and others in the service industry) below the minimum wage, as long as the worker’s tips push the employee’s overall pay over minimum wage.  This Final Rule takes effect November 23rd.

Service workers are predominantly women, immigrants, and people of color.  And, while the economy seems to seek to push the overall wages of service workers to well over minimum wage, this DOL Final Rule allows employers more flexibility to pool tips and share among staff, so long as each employee receives at least the applicable minimum wage.  It also clarifies that managers and supervisors may keep tips for services they directly and solely provide, but they can voluntarily or under a mandatory tip pool contribute tips they receive directly to the share pool.  And, any employer that pays the full minimum wage base, may have a Tip Pool allowing tips to be accumulated and shared with other employees who do not typically directly receive tips, like hosts, cooks, maître ’ds, dishwashers, etc.

That is the DOL.  State laws may still prohibit tip sharing between tipped and non-tipped employees under any circumstances.  The state where the employee works will control the state requirements and prohibitions.  And under the DOL Final Rule, employers may still face fines of up to $1,100 each time an employer misuses or retains employee tips, regardless of whether the misuse occurs repeatedly or is intentional – is willful.  The DOL final rule revises the definition of “willful” to include employer violations committed with “reckless disregard” for the FLSA.  Reckless disregard typically is based on all of the facts and circumstances that the employer should have known or asked about.

Notably, historically, there was an 80/20 rule, which allowed employers to use a tip credit (to meet minimum wage) for employees who did non-tip duties (e.g., rolling silverware into napkins, stocking salt & pepper, etc.) a maximum of 20% of their time.  The Final Rule did not address those circumstances or provide any update or new guidance, which is expected in upcoming DOL announcements.

Here at Epps & Coulson, LLP we understand that wage and hour issues may be confusing.  We are available to advise.  Feel free to contact Dawn: dcoulson@eppscoulson.com.

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is considered advertising under laws of some states.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

Attorneys admitted to practice in
California, New York, Colorado, Texas, and Oregon