DOL Set to Rescind Restrictions on Tip Pooling

Author: Sean Gentry

The U.S. Department of Labor is preparing to eliminate a 2011 restriction on certain hospitality employers from entering into tip-sharing agreements with individuals who are not customarily and regularly tipped.

The effect of this is that restaurant employers will likely be able to include kitchen and back-of-the-house employees in the tip pool.  This may alleviate problems some restaurants have had in retaining high quality back-of-the-house employees because it may allow employers to more easily compensate such employees in comparison to tipped employees.

As a reminder, employers are still subject to state laws.  In California this means that the tip-pool may not include any owners and most managers or supervisors, even if those individuals provide direct service to a customer.

The 9th Circuit Court of Appeals previously upheld this 2011 regulation, but that case is now before the U.S. Supreme Court in the case of Oregon Restaurant & Lodging Assoc. v. Perez.  Therefore, despite some serious concerns about the effects this change in policy may have on tipped employees nationwide, we expect to see dramatic changes this year as the DOL and Supreme Court weigh in on tip-pooling, and as California’s legislature might react by imposing some of its own new regulations.

By Scripta Ad Astra Staff

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