How The New ‘Tipped Pool’ Rule May Impact Restaurant Employers

Tips, tip credits and tip pools are staples in the restaurant industry. Restaurant employers utilize them daily. Earlier this month, the U.S. Department of Labor – the federal agency charged with enforcing the Fair Labor Standards Act (“FLSA”) – proposed a new Rule implementing certain provisions from recently enacted legislation amending the FLSA. This Rule could affect how employers utilize tip pools and employees who both traditionally earn and do not traditionally earn tips as part of their wages.

Employers have applied a “tip credit” against the minimum hourly wage paid to employees who earn at least $30 in tips per month for decades. These employees primarily include front-of-house staff, such as servers and bartenders. This long-standing law currently allows employers to credit $5.12 against the minimum hourly wage, reducing the pay rate to $2.13 per hour (higher in certain states), so long as the employee earns enough tips to meet the applicable minimum hourly…