Public Comments | Unions and Labor Standards

EPI comments on the partial withdrawal of the 2020 Tip Final Rule

Submitted via www.regulations.gov

Amy DeBisschop
Acting Director of the Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
200 Constitution Avenue N.W., Room S-3502
Washington, DC 20210

Re: RIN 1235-AA21, Comments in Response to Proposed Rule, Tip Regulations Under the Fair Labor Standard Act (FLSA); Partial Withdrawal

The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers, and assesses policies with respect to how well they further those goals. EPI submits these comments on the Department of Labor’s (DOL/Department) request for comment on the proposal to withdraw and repropose portions of the rule entitled “Tip Regulations Under the Fair Labor Standards Act” (2020 Tip Final Rule/Tip Rule).1

In the notice of proposed rulemaking (NPRM), the Department proposes to withdraw and repropose portions of the rule that narrow the circumstances in which DOL can assess civil money penalties for violations. Further, the Department seeks comment on whether to revise the portion of the 2020 Tip Final Rule that addresses “managers or supervisors.” Finally, the Department requests comments on how to improve the recordkeeping requirements in the 2020 Tip Final Rule in a future rulemaking.

For thirty years, the federal wage for tipped workers has been frozen at a meager $2.13, with median hourly earnings for workers in common tipped jobs—such as restaurant servers and bartenders—at $12 per hour or less.2 Women—disproportionately women of color—represent nearly 70% of tipped workers nationwide and are more likely to experience poverty than their male counterparts.3 Further, tipped workers’ economic security is precarious given that they are especially vulnerable to wage theft.4 For these reasons, strengthening protections for tipped workers should be a priority for the Department of Labor.

EPI supports the Department’s withdrawal of the portion of the 2020 Tip Final Rule requiring that violations of Section 3(m)(2)(B) of the Fair Labor Standards Act (FLSA) be willful or repeated for the Department to impose civil monetary penalties. The original implementation of this requirement in the 2020 Tip Final Rule contradicted Congress’s legislative intent. This intent was made clear when Congress deliberately required in the civil penalties section of the FLSA that minimum wage and overtime violations occur “repeatedly and willfully” before penalties apply but declined to include this heightened requirement for violations when adding Section 3(m)(2)(B), which bars employers from taking workers’ tips.5 The NPRM’s withdrawal of the willful or repeated requirement correctly restores Congress’s intent for imposing civil monetary penalties for Section 3(m)(2)(B) of the FLSA.

In regard to the Department’s request for comment on the treatment of tips received by managers and supervisors, EPI recommends that the Department clarify that an employer may either 1) permit a manager and/or supervisor to keep any tips received for service that they directly provide, or 2) require the manager and/or supervisor to share it with other non-managerial and non-supervisory staff. If the Department decides to pursue a policy that requires managers and supervisors who receive tips to pool or share them, but not receive any portion of their colleagues’ tips, EPI recommends that the Department include a compensation level test in addition to a duties test for the purposes of defining managers and supervisors. In doing so, the Department would help ensure that low-paid managers and supervisors are not adversely affected by this rule. Because tip pooling typically arises in restaurant settings, we suggest that the Department set an earnings threshold that corresponds to the median wage for Supervisors of Food Preparation and Serving Workers—35-1010 in the Standard Occupational Classification system—based on the most recent National Occupational Employment and Wage Estimates (OES) from the U.S. Bureau of Labor Statistics, which could be met on an annual or hourly basis. This level should be defined in regulation and should reference the OES source so that it is automatically adjusted each year. The current level, based on May 2020 data, is $35,900 annually, or $17.26 per hour.6

Regarding the Department’s request for comment on how to improve the recordkeeping requirements, EPI supports the Department’s suggestion of “requiring employers to keep a record of the total contributions to an employer-mandated tip pooling or tip sharing arrangement and keep track of the total amount in tips that each employee receives from such an arrangement, in order to ensure that employers are not keeping tips and that all tips are distributed to employees.”7 Implementing this requirement can assist in tracking and alleviating the extensive wage theft that plagues workplaces throughout the country.8 EPI recommends that the Department require employers to record this information regularly or at a frequency for feasible enforcement—ideally, either each day or each workweek.

Further, EPI recommends that the Department provide employees with written notice of the structure of any employer-mandated tip pooling or tip sharing arrangements. This written notice should be provided to employees at the time of their hiring (or when the employer establishes the arrangement) and should outline the following terms: which employees are included in the tip pooling or tip sharing arrangement, the required contribution, the method of distribution, and the employee’s hourly rate of base pay. In addition, employers should be required to provide updated written notice to employees if any of the previously listed terms change.

Thank you for the opportunity to submit comments on this NPRM.

Sincerely,

Heidi Shierholz
Senior Economist and Director of Policy
Economic Policy Institute

Margaret Poydock
Policy Analyst
Economic Policy Institute

Ihna Mangundayao
Policy Assistant
Economic Policy Institute

Endnotes

1. 86 Fed. Reg. 15817.

2. See Bureau of Labor Statistics, “May 2020 National Occupational Employment and Wage Estimates United States,” Occupational Employment and Wage Estimates, last modified on March 31, 2021. In 2020, median hourly wages, including tips, were $11.42 for waiters and waitresses and $12.00 for bartenders, the two largest groups of tipped workers.

3. National Women’s Law Center, One Fair Wage: Women Fare Better in States with Equal Treatment for Tipped Workers, February 2021.

4. David Cooper and Teresa Kroeger, Employers Steal Billions from Workers’ Paychecks Each Year, Economic Policy Institute, May 2017.

5. See 29 U.S.C. §216(e)(2); see also § 216(e)(1)(ii) (providing for doubling of CMP applicable to certain child labor violations “where the violation is a repeated or willful violation”).

6. Bureau of Labor Statistics, “May 2020 National Occupational Employment and Wage Estimates United States,” Occupational Employment and Wage Estimates, last modified on March 31, 2021.

7. 86 Fed. Reg. 15825.

8. David Cooper and Teresa Kroeger, Employers Steal Billions from Workers’ Paychecks Each Year, Economic Policy Institute, May 2017.


See related work on Unions and Labor Standards | Tipped Minimum Wage

See more work by Heidi Shierholz, Margaret Poydock, and Ihna Mangundayao