NEW LABOR LAW for Tipped Employees

MyTPG Blog
Published: 07/8/21 5:00 AM

Title image for NEW LABOR LAW for Tipped Employees showing a tip jar on top of a counter.

NEW LABOR LAW for Tipped Employees

This article was published on: 07/8/21 5:00 AM




On Dec. 22, 2020, the U.S. Department of Labor (DOL) announced a final rule to amend employee tip regulations under the Fair Labor Standards Act (FLSA). The final rule will become effective 60 days after its publication in the Federal Register. Here’s what you need to know about the new labor law for tipped employees.


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This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

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Tip Pooling

The FLSA allows employers to collect all the tips employees receive into a common employee tip pool, then redistribute these tips among employees in an equitable manner.

The Final Rule

This new final rule prohibits employers from keeping their employees’ tips and specifically prohibits managers and supervisors from keeping any portion of employee tips, including tips from a tip pool.

In addition, the rule limits an employer’s ability to implement mandatory tip pools that include non-tipped employees and incorporates a new recordkeeping requirement for employers that do not take a tip credit but collect employees’ tips to operate a mandatory tip pool.

Tipped Wages

  • The FLSA also allows employers to pay a subminimum wage rate to individuals who are engaged in an occupation in which they “customarily and regularly” receive at least $30 in tips per month.
  • Employers are allowed to collect all the tips employees receive into a common employee tip pool.

The new labor law for tipped employees limits an employer’s ability to implement mandatory tip pools that include non-tipped employees.


Finally, the new rule also incorporates new civil monetary penalties, codifies recent DOL guidance on how to compensate a tipped employee who performs non-tipped duties at work and harmonizes FLSA requirements with Executive Order 13658 (Establishing a Minimum Wage for Contractors).

Labor Law for Tipped Employees Impact on Employers

Employers with tipped employees should become familiar with these new regulations and adjust their timekeeping, tip pooling and payroll practices to comply with this rule by its effective date.

To learn more about keeping your payroll in compliance with DOL Regulations contact TPG Payroll & HR Services at 909.466.7876 right now! We would also love for you to visit Payroll and Tax Management – Painless From Punch To Pay, a resource from our knowledgeable experts made in consideration of your needs.


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