The Department of Labor recently issued a final rule regarding tipped employees. This rule will take effect on March 1, 2021.

Many employers in service industries utilize a “tip credit” and pay their employees less than the minimum wage and then claim the “tip credit” for work done before, during, or for a reasonable time after tip-earning work. This type of work includes common tasks such as clearing dishes or rolling silverware. Currently, in Vermont, tipped employees must earn at least $5.88 an hour. In New Hampshire, which follows the federal minimum wage, tipped employees must earn at least $2.13 per hour. Previously, employers could only require tipped employees to spend up to 20% of their time performing non-tipping duties. Under this new rule, there is no set percentage limit. Additionally, employers can now require tipped employees to “pool” or share earned tips with other non-tipped employees. For example, tips earned by waiters and waitresses are pooled and shared among both the wait staff and employees in the kitchen. This final rule also explicitly prohibits employers, regardless of whether they take a tip credit, from keeping employees’ tips for any purpose, which includes prohibiting managers and supervisors from keeping tips received by employees. See these complete list of changes regarding tipped employees at the link.

Related Practice Areas

Labor & Employment Law