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Congress Weighs in on Tip Pooling

Recently, Congress introduced the Omnibus Spending Bill which includes provisions for tip pooling. Tip pooling provisions can be complicated and often restaurant and hotel workers - employees who often rely on tips - find themselves on the short end of the arrangement, and fail to receive compensation they have rightfully earned.

The Fair Labor Standards Act ("FLSA") provides that tip pooling is allowed among those employees who regularly receive tips, however, non-tipped earners are not allowed to participate in tip sharing arrangements. Further in some situations employers may pay tipped employees less than minimum wage.  However, the tipped workers must receive enough pay when adding in tips to make at least minimum wage, and the tips may come from straight tips or from a valid tip pool. In late 2017, the DOL set forth a proposal announcing its intention to rescind rules concerning tip pools. The notice left many wondering if this meant that tipped workers may now be required to share tips with managers/employers and business owners. However, the spending bill clarified some of these questions by specifically noting an employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of if the employer takes a tip credit.’’ Additionally, the spending bill increased the penalties an employer may be liable for should they violate this statute.

This issue is significant as different categories of employees may dispute whether they should be included in tip pool arrangements.

For clarification of tip sharing laws, or if you have any wage and hour questions, please contact the experienced Atlanta wage and hour lawyers at Buckley Bala Wilson Mew LLP for an immediate case evaluation.

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