The FLSA, 29 U.S.C.S. §203(m), was amended as follows:
1. “Wage” paid to any employee includes the reasonable cost, as determined by the Administrator [Secretary], to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees: Provided, That the cost of board, lodging, or other facilities shall not be included as a part of the wage paid to any employee to the extent it is excluded therefrom under the terms of a bona fide collective-bargaining agreement applicable to the particular employee: Provided further, That the Secretary is authorized to determine the fair value of such board, lodging, or other facilities for defined classes of employees and in defined areas, based on average cost to the employer or to groups of employers similarly situated, or average value to groups of employees, or other appropriate measures of fair value. Such evaluations, where applicable and pertinent, shall be used in lieu of actual measure of cost in determining the wage paid to any employee.
2. (A) In determining the wage an employer is required to pay a tipped employee, the amount paid such employee by the employee’s employer shall be an amount equal to—
(i) the cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such an employee on the date of the enactment of this paragraph [enacted August 20, 1996]; and
(ii) an additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in clause (i) and the wage in effect under section 6(a)(1) [29 USCS § 206(a)(1)].
(B) An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.
The additional amount on account of tips may not exceed the value of the tips actually received by an employee. The preceding 2 sentences shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.
On April 6, 2018, the Acting Wage and Hour Administrator issued a field guidance advising, in pertinent part: “In the meantime, given these developments, employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools. The Act prohibits managers and supervisors from participating in tip pools, however, as the Act equates such participation with the employer’s keeping the tips.”
On October 8, 2019, U.S. D.O.L. published a proposed amendment to 29 CFR 531.54 regarding tip pooling to reflect the CAA amendment to the FLSA:
C. Proposed Section 531.54—Tip Pooling
The Department also proposes to amend § 531.54, which generally addresses tip pooling, to reflect the CAA amendments. Proposed § 531.54 incorporates section 3(m)(2)(B)’s prohibition on employers keeping tips, including allowing managers or supervisors to keep employees’ tips. This prohibition applies regardless of whether the employer takes a tip credit, and therefore governs any employer that facilitates or operates a mandatory tip pool. Proposed § 531.54 also contains other specific requirements for employers that establish mandatory tip pools, depending on whether they include employees who do not customarily and regularly receive tips…
ii. Additional Requirements for Mandatory Tip Pools When an Employer Takes a Tip Credit
Current § 531.54 provides that an employer, regardless of whether it takes a tip credit, may only require its tipped employees to share tips with other employees who customarily and regularly receive tips. The employer also must notify its employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each employee ultimately receives, and may not retain any of the employees’ tips for any other purpose. Although, as discussed above, the CAA amendments deprived of any further force or effect these regulatory tip pooling requirements as they apply to employers that do not take a tip credit, the CAA did not affect these requirements as they apply to employers that do take a tip credit. Therefore, proposed § 531.54(c) retains these requirements but clarifies that they apply only to employers that take a tip credit.
iii. Conditions Under Which an Employer May Mandate Participation in a Nontraditional Tip Pool
As explained above, as a result of the CAA amendments to the FLSA, employers that do not take a tip credit may now require tipped employees to participate in nontraditional tip pools that include employees who do not customarily and regularly receive tips, such as cooks and dishwashers, so long as the pools do not include employers, managers, or supervisors. Proposed § 531.54(d) implements these conditions. As explained above, the CAA did not substantively amend the FLSA’s existing tip credit provision, which states that employers may only take a tip credit against their minimum wage obligations to employees who are employed in an occupation in which they customarily and regularly receive tips, such as bussers and servers, and that employers that take a tip credit may only require tip pooling among such employees. See 29 U.S.C. 203(m)(2)(A).