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DOL Tips Rule Nears Release in Latest Eleventh-Hour Deregulation

Nov. 27, 2020, 1:26 PM

The restaurant industry’s years-long push for eased regulations on paying tipped workers for time spent on side work that doesn’t generate gratuities is closer to reality just as the Trump administration is about to exit.

The U.S. Labor Department has submitted a long-anticipated final rule to the White House Office of Information and Regulatory Affairs in a notice appearing on the agency’s website Thursday. This is typically the final major step before the rule can be released to the public.

If finalized as proposed, the regulation would allow employers to pay tipped employees the lower minimum wage of $2.13 per hour regardless of the amount of time they spent on non-tipped duties, such as rolling silverware or cleaning their work stations. This would withdraw the department’s previous interpretation that workers, such as servers and bartenders, must be paid the full federal hourly minimum of $7.25 when spending at least 20% of their workweek on tasks that don’t yield gratuities from customers, rather than the base pay of $2.13 for tipped occupations.

Completing this rule before President Donald Trump leaves office Jan. 20 would represent a victory for the hospitality industry and management attorneys by shielding them from an increasingly common form of litigation in which workers allege they’re owed back pay for hours working on non-tipped duties when they didn’t earn at least $7.25.

The tips regulation is part of a package of business-friendly rules the DOL is rushing to issue in the final weeks of the Trump administration. That list also includes a final rule to ease employers’ ability to rely on independent contractors and to solidify religiously affiliated federal contractor exemptions from anti-discrimination requirements.

Even if the DOL’s Wage and Hour Division can release the tips rule in time for it to take effect before Inauguration Day, it would face an uncertain future once President-elect Joe Biden takes office.

Democratic state attorneys general have already indicated they’d file a lawsuit arguing the rule violates the Administrative Procedure Act. Biden’s DOL would be likely to embrace a return of the pre-Trump interpretation on paying for non-tipped duties.

A separate less-controversial aspect of the rulemaking would clarify a 2018 policy rider passed into law in a government spending bill that prohibits employers—including supervisors and managers—from participating in tip-pooling arrangements.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editor responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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