Jim Coleman authored an article published by Nation’s Restaurant News and Restaurant Hospitality on April 24, 2018, providing details on the Tip Income Protection Act of 2018. Found deep within the Consolidated Appropriations Act passed March 23, 2018 is legislative language prohibiting employers from keeping tips received by employees. While the Department of Labor announced FLSA regulations extending protections to tip income in 2011, courts were hostile to the regulation and ruled that the extension was not supported by the FLSA. In 2017, the DOL attempted to rescind the 2011 extended regulation, but the topic quickly became highly politicized, resulting in a buried resolution in the 2018 government spending bill. Until this resolution, the FLSA secured an employee’s right to receive minimum wage and overtime pay, but now, it covers all tip income regardless of whether the employer relies on the tip income to meet minimum wage requirements.
An additional point that will need clarification is who will be considered a “manager or supervisor.” For the purposes of the 2018 amendments, the Labor Department’s definition of “manager or supervisor” is based on the job duties for “executive” employees under the white-collar exemptions of the FLSA, meaning individuals with the duty of management, directing two or more employees, or having hiring and firing powers. However, since the DOL field guidance has not limited the definition to employees paid on a salary basis, it is feasible that hourly paid, non-exempt supervisors are prohibited from keeping any tip income, which could make the position unappealing.
“As with most litigation issues, there will be two distinct sides as to how the new statutory language should be interpreted by the courts, and only time will tell as to which side will prevail,” said Coleman. “Much needs to be done in the upcoming rulemaking proceeding promised by the Labor Department to bring clarify to this issue if years of litigation are to be avoided.”
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