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Comments to the Department of Labor on Tip Pooling

In 2017, the Wage and Hour Division of the Department of Labor proposed a regulation permitting employers to implement mandatory, nontraditional tip pools—that is, to require front-of-the-house workers like waiters to share their tips with back-of-the-house workers like dishwashers and line cooks. But in response to concerns that DOL’s proposal would result in employers themselves pocketing a share of the tip pool, Congress blocked the agency from finalizing the 2017 Proposal. Specifically, Congress added a provision to the Fair Labor Standards Act providing that “[a]n employer may not keep tips received by its employees for any purposes.”

DOL has now released a new version of its tip-pooling proposal, on which Policy Integrity filed comments. Under the new proposal, employers and managers may not themselves participate in tip pools. But, as DOL itself acknowledges, the rule would still permit employers to indirectly benefit from the tip pool by reducing the wages they pay back-of-the-the house workers to offset some or all of the money that those workers receive from the tip pool. In other words, the rule will enable employers to replace money that they are currently paying back-of-the-house workers out of their own pocket with money taken from front-of-the-house workers’ tips.

Our comments urge DOL to better explain why a rule that allows this sort of indirect capture of employees’ tips is consistent with Congress’s dictate that employer may not “keep” employees’ tips “for any purposes.” We also push the Department to estimate the amount of money that employers will be able to transfer from their employees as a result of the rule and to address a number of other shortcomings in its assessment of the rule’s costs and benefits.