Restaurant owners whose employees participate in “tip pools” should be aware that revisions have been proposed to the complex rules adopted by the U.S. Department of Labor (“DOL”) governing this common practice. The current rules have given rise to considerable litigation against restaurant owners, so the proposed revisions should be carefully monitored.

Under the current rules, controversy continues to surround the recent DOL proposal to roll back the 2011 tip pool ruling under the Fair Labor Standards Act. Currently, the DOL ruling provides that only employees who “customarily and regularly” receive tips from customers can participate in any pooling of tips collected, such employees who are generally “front-of-house” staff (e.g., wait staff, servers, bus-boys/girls and bartenders). The rule prohibits “back room” employees, such as kitchen staff, cleaning staff and management, from participating in tip pools.

On Dec. 4, 2017, the DOL proposed eliminating the rule, thereby permitting “back room” employees to participate in tip pools. The DOL contends that removal of the limitation rule will help decrease wage disparities between tipped and non-tipped workers in the restaurant industry. The proposed change in the rule was the latest development on the issue following substantial litigation.

A significant concern from critics of the proposal is that management employees would be permitted to participate in tip pools, redistributing billions of dollars in gratuities to managers and employers at the expense of employees who traditionally rely on tips as a significant component of their wages.

The public comment period on the proposed regulations closed on Feb. 5. We will continue to monitor this issue closely and will provide updates as appropriate. Members of Taft’s Employment and Food & Beverage groups are available to discuss any questions you might have regarding the use of tip pools for your employees.