Omnibus Budget Bill Amends FLSA Tip Provisions

Author: Robert S. Teachout, XpertHR Legal Editor

March 29, 2018

An amendment to the Fair Labor Standards Act (FLSA) in the Consolidated Appropriations Act of 2018, the omnibus budget bill signed into law by President Trump and effective on March 23, prohibits employers, including managers or supervisors, from keeping any part of tips received by employees for any purpose, regardless of whether the employer takes a tip credit.

The amendment also repeals Department of Labor (DOL) regulations issued during the Obama administration that prevented employers from requiring employees who traditionally receive tips, such as restaurant servers, to share their tips with employees who usually do not receive tips, such as cooks and dishwashers. Consequently, an employer may now require tipped employees to share tips (i.e., tip pooling) with non-tipped employees, so long as the employer does not take a tip credit.

The amendment goes farther than a rule that had been proposed by the DOL. Although the proposed rule also sought to repeal the Obama-era tip-sharing prohibition, it did not seek to prevent employers and managers from retaining employee's tips where the employer did not take a tip credit.

Under the amendment, employers that violate the new provisions can be sued by employees for civil penalties of up to $1,100 per violation, along with recovery of unlawfully retained tips and an equal amount in liquidated damages. In addition, if an employer unlawfully retains tips and takes a tip credit, the penalty will include loss of the tip credit.