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“Tip Credit” Final Rule Delayed

Published on

March 2, 2021

Amid a flurry of activity with the change in federal administration, the U.S. Department of Labor has decided to delay the effective date of the controversial Tip Credit Regulations Final Rule.

The rule had been slated to go into effect March 1. Now it won’t go into effect until at least April 30.

The delay comes after the DOL claims it received 19 comments, 17 of which were in favor of delaying the effective date. Additionally, the department noted that shortly after it published the final rule, attorney generals in nine states – including Pennsylvania – filed a federal lawsuit seeking to upend the rule. This postponement will permit the DOL to review the rule in light of the comments and pending litigation.

The delay is the latest in a number of DOL rules under President Joe Biden that are being delayed while the new administration examines them. Most of the rules being delayed are late-term rules pushed by former President Donald Trump’s administration.

The Tip Credit Regulations Final Rule, issued in late December 2020, controversially permitted employers to exert control over an employee’s tips if the employer:

  • Promptly distributes tips to the employees who received them
  • Requires employees to share tips with other eligible employees
  • Facilitates tip pooling by collecting and redistributing tips to eligible employees in a tip pool by the next regularly scheduled payday

The final rule also permitted employers to compel tipped employees to share tips with non-tipped employees as long as:

  • The employer does not take a tip credit
  • The tips are not shared with supervisors, managers or the employer
  • The employer compensates all of the employees in the tip pool (both tipped employees and non-tipped employees) federal minimum wage

While we certainly expect more updates with this issue, please contact me or anyone in the Barley Snyder Employment Practice Group if you have any questions regarding how the delay of the final rule may affect your business.

DISCLAIMER: The information in this alert should not be construed as legal advice to be relied upon nor to create an attorney/client relationship. Please note that the reader’s or an industry’s specific situation or circumstances will vary and, thus, for example, an approach that is advisable in one industry may not be appropriate in another industry. If you have questions about your situation or about how to apply information contained in this alert to your situation or industry, you should reach out to an attorney.

The views expressed in this alert are those of the individual author and do not necessarily reflect the views of the firm or the firm’s clients. The response to the COVID-19 pandemic is particularly challenging, evolving and, in many cases, can be controversial. Any views expressed in this alert are not intended to advocate for or endorse a particular governmental response to the pandemic.

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