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Restaurant Employers Take Note: DOL Proposes New FLSA Tip Regulations

In the months since the Supreme Court of the United States upheld Auer deference, courts around the country have consistently declined to afford deference to the U.S. Department of Labor’s November 2018 opinion letter which undercut the so-called “80/20” rule. Today, likely in response to the lack of traction its sub-regulatory guidance had gained with courts, the DOL issued proposed rules concerning tipped workers.

The DOL’s proposed rules would elevate the guidance of its November 2018 opinion letter. For those employers who do not take a tip credit, the DOL also expanded the universe of those who are eligible to participate in mandatory tip pools.

Among other things, the DOL’s notice of proposed rulemaking proposes: 

  • Explaining that an employer may take a tip credit for any amount of time that a tipped employee performs related non-tipped duties contemporaneously with his or her tipped work, or for a reasonable time immediately before or after performing the tipped duties.
  • Removing regulatory language restricting an employer’s use of tips when the employer does not take a tip credit, allowing such employers to include back of house workers in a mandatory tip pool. 

While these proposed rules are not final, each would represent a welcome development for restaurant employers. The plaintiffs’ bar has long pursued class and collective action lawsuits alleging one or a combination of 80/20 and improper tip pool claims. Should these proposed rules go into effect, restaurant employers will have a significant new defense to fight back against such claims. 

Given the prevalence of 80/20 claims in the service industry, restaurant employers would be well served by taking note of this new proposed rulemaking and its potential as a potent defense against class and collective litigation.

The DOL’s proposed rules will be published on October 8, 2019, and will be available for review and comment for 60 days.


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