This week the Department of Labor issued new guidance, in a “Field Assistance Bulletin,” on the recent amendment to the FLSA regarding tip sharing. The recent amendment to the FLSA (which was included in the omnibus budget bill) bars “supervisors or managers” from retaining tips but expressly allows tipped workers to share tips with non-tipped workers, so long as the employer does not take a tip credit and the individuals participating in the tip sharing are not managers or supervisors. The amendment, however, contains no definition of the terms “supervisor” or “manager.” The new guidance explains that, for purposes of the new amendment to the FLSA, a “supervisor or manager” is an individual who performs the duties of an exempt manager under the FLSA’s “executive” exemption.
Under DOL regulations, to satisfy the duties test for the executive exemption, three requirements must be met: (1) the employee’s primary duty must be management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; (2) the employee must customarily and regularly direct the work of two or more other employees; and (3) the employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.
Under the DOL guidance, whether an employee is paid on a salary basis is not relevant to whether they can participate in sharing tips. Thus, if a manager performs the duties of an exempt employee under the executive exemption but is not paid on a salary basis, the individual still could not share in tips received by employee, even though they may be non-exempt because they fail to satisfy the salary basis test. The DOL has stated its intention to “proceed with rulemaking in the near future to fully address the impact of the 2018 [FLSA] amendments” which, hopefully, will provide further clarification as to how the executive exemption duties test will be applied in the tip-pooling context.
Jackson Lewis will continue to monitor developments related to the new tip-pooling law. Additionally, employers should review state-law requirements and their interaction with the FLSA.