Legislative lowdown: DOL addresses tip-pooling in first batch of opinion letters

The Department of Labor issued four opinion letters on Sept. 30 explaining how federal labor law applies to specific workplace situations. Among the letters was a document addressing the issue of tip-pooling, which allows tipped service workers to share their tips with one another in a “pool.”

In this opinion letter, the DOL stated that front-of-house oyster shuckers, despite not regularly receiving tips directly from customers, can be included in a tip pool.

Why some front-of-house workers count as tipped employees. The DOL issued its letter in response to a question from a seafood restaurant that asks its servers to contribute to a tip pool that includes colleagues who aren’t usually tipped directly by customers, including the oyster shuckers in question.

Federal law allows employers to pay tipped workers as little as $2.13 an hour provided they earn at least $7.25 an hour—the federal minimum—when tips are included. They receive a tip credit of up to $5.12 an hour for doing so.

Under the Fair Labor Standards Act (FLSA), employers may also require these workers to contribute to a tip pool provided included members are “limited to employees who customarily and regularly receive tips,” James R. Macy, acting administrator for the DOL, wrote in the letter.

The DOL determined the oyster shuckers in question would fall under that category given they often interact with customers. Such interactions may include “sharing and detailing oyster offerings to customers, making suggestions to customers regarding the oyster offerings, and fielding questions about the different options,” the DOL said. It compared the position to that of a sommelier who explains wines to customers and offers wine pairings—another profession the agency has determined is “a customarily and regularly tipped occupation.”

A dishwasher who shucks oysters and peels shrimp from time to time in the restaurant’s kitchen, however, wouldn’t fall under this category, as the worker “lacks sufficient interaction with the customers who leave tips, a portion of which are subsequently contributed to a tip pool,” Macy wrote.

How HR may apply this letter. HR teams can take this letter into consideration when considering which of their organization’s employees may be included in a tip pool.

While the document aligns with previous DOL guidance regarding tipped occupations, attorneys with law firm Littler Mendelson noted regulations will differ when determining which employees are eligible for the “No Tax on Tips” credit set to take effect next year. In a preliminary list of occupations that will be eligible to claim this credit, the Treasury Department said dishwashers and cooks would qualify, even though such workers have not historically been considered tipped employees by the DOL.

It’s worth noting that a number of states require workers to pay a higher tipped minimum wage than the federal government, and some jurisdictions have phased out the tipped minimum wage altogether. HR teams should comply with the most restrictive statutes in such cases.