DOL Cracks Down, And Opens Cracks, On Employers Keeping Tips

Employers will soon face stricter financial penalties for keeping their employees' tips under a final rule published by the U.S. Department of Labor (DOL) on September 24, 2021. Section 3(m)(2)(B) of the Fair Labor Standards Act (FLSA) prohibits employers-including "managers and supervisors"-from keeping employees' tips "for any purposes," regardless of whether employers claim a tip credit. Under the current Trump-era regulation, the DOL may only assess civil money penalties (CMPs) of up to $1,100 per violation against employers that "repeatedly or willfully" keep their employees' tips. Notably, the new final rule revises the definition of "willful" to apply when the DOL finds the employer should have inquired as to whether its tip practices were lawful. More importantly, under the new final rule, the DOL will have the ability to levy CMPs (in addition to any back wages owed) against employers regardless of whether the violations are repeated or willful.