A Second Circuit Court Declares DOL’s Tip Pool Rule Invalid

The 10th U.S. Circuit Court of Appeals has joined the 4th in deciding the 2011 tip pool rule by the Department of Labor (DOL) is invalid. The rule prohibits employers from sharing tips received by tipped employees such as servers with non-tipped employees such as dishwashers.

The restaurants have fought back, arguing in court that this goes against the language of the Fair Labor Standards Act (FLSA). So far, two circuit courts have agreed with the restaurant lawsuits, and one — the 9th Circuit — has sided with the DOL.

Complicating the issue is the fact that federal law permits restaurateurs to take a “tip credit,” essentially paying their employees as little as $2.13 an hour if tips bring them to the federal minimum wage of $7.25 an hour. Some states also allow this; others forbid it.

The DOL tip pool rule ostensibly was meant to protect tipped employees from falling below the minimum wage. Restaurant owners who paid the minimum wage argued that they should be able to pool tips among employees. The 2011 rule put the kibosh on that idea. No tip pools, period, basically.

The National Restaurant Association has asked the Supreme Court to review the 9th Circuit’s decision, but the DOL — despite four extensions — has so far failed to present a brief in the case. The Supreme Court now has given the DOL until Sept. 8 to respond.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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