Labor Department Indicates It Will Rescind Tip-Pooling Restrictions

Labor Department Indicates It Will Rescind Tip-Pooling Restrictions

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The U.S. Department of Labor has signaled its plan to rescind its controversial tip-pooling restrictions at least as it applies in states like Washington where tips cannot be used to offset the federal minimum wage.

On July 20, it stated it will issue a “Notice of Proposed Rulemaking,” the first step in changing the tip regulations issued in 2011 under the Obama administration. It specifically states “in this Notice of Proposed Rulemaking, the Department will propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.”

“This does not immediately change existing law, but sets the table for future action,” says Catharine Morisset, a partner in Fisher Phillips’ Seattle office.

For now, the tip pool rule remains in place, and our petition with the National Restaurant Association and others to the Supreme Court to review the 9th Circuit’s ill-advised ruling remains active. No action from the high court is expected before Sept. 8, which is the new deadline for DOL to respond to the NRA’s certiorari petition.

Ultimately we do not know how the Federal law and state law will interact. Employers should know that mandatory tip pools come with their own set of risks under Washington state law. Tips cannot go to managers or owners but, if the Federal restrictions are reversed, tipping the back of the house would be possible. As of this writing, all details have yet to be finalized but our legal team is excited to help you navigate this process once the decisions are final.

Restaurateurs should be aware that during an eventual new rulemaking process, despite DOL enforcement being stayed, an individual employee could still file a private lawsuit against an employer over tip pool practices. If the employee were to prevail, there could be a significant lookback period.

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