FLSA Amendments: Congress Extends Tip Sharing to Back of the House Employees

On March 23, 2018, Congress amended the Fair Labor Standards Act (FLSA) to remove the prohibition on tip pooling, subject to certain circumstances. Under the FLSA, an employer is permitted to pay a reduced hourly wage to tipped employees, provided the employees receive enough tips to bring hourly wages to the federal minimum wage. Employers may claim credit for tips the employees have received both directly and as a distribution from a tip pool.

The amendment to the FLSA details that “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.” Notably, the amendment now permits tip sharing between tipped and non-tipped employees (excluding managers and supervisors), as long as the employer pays full minimum wage rather than the tipped minimum wage to its employees and does not take a tip credit. Previously prohibited…