On October 28, 2021, the U.S. Department of Labor (DOL) issued its Final Rule on tipped wages. As Presidential administrations have changed through the years, so too has the DOL’s view regarding the circumstances under which employers can pay tipped workers less than the federal minimum wage. [See this 2019 post for the immediately prior administration’s position.] In the latest iteration of DOL policy on this issue – which goes into effect on December 28, 2021 – the Biden administration comes out firmly on the side of tipped employees.
Although the Fair Labor Standards Act (FLSA) generally requires that employers pay workers a minimum wage of $7.25/hour (see 29 U.S.C. § 206(a)), the law permits employers of tipped employees to take a “tip credit,” only paying employees who customarily receive at least $30/month in tips from customers a cash wage as little as $2.13/hour, as long as the employer ensures that the aggregate of cash wages paid directly by the employer plus tips paid to the worker by customers results in the tipped worker earning at least $7.25/hour (see 29 U.S.C. § 203(m)(2)(A)). However, the long-standing tip credit model presumes that tipped employees receive a steady flow of tips and spend nearly all of their working hours engaged in tip-generating labor, a presumption that does not always align with reality.
Recognizing that many tipped workers are tasked with time-consuming duties for which they are not tipped, under the Final Rule (also known as the “...
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