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Congress Passes Law Protecting Tipped Employees in New Jersey and Nationwide

The Fair Labor Standards Act (FLSA) establishes a nationwide minimum wage, which has been $7.25 per hour since 2010. This does not apply to all workers, however. The minimum wage that employers of tipped employees, such as restaurant servers, must pay is considerably less than $7.25 per hour, with the understanding that tips received from customers will at least make up the difference. In late 2017, the U.S. Department of Labor (DOL) proposed a rule that would give employers more control over the distribution of tips, which met with considerable criticism. In March 2018, a member of the House of Representatives from Connecticut introduced the Tip Income Protection (TIP) Act of 2018. While this bill has not advanced, a similar measure made it into the Consolidated Appropriations Act (CAA) of 2018, which was signed into law on March 23. This effectively rendered the proposed DOL rule moot.

A “tipped employee,” under the FLSA, is someone who, in the course of their job, “customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t). Employers are obligated to pay tipped employees a base rate of $2.13 per hour. Id. at § 203(m)(1), 29 C.F.R. § 531.50(a). If the amount of tips received by a tipped employee, when added to this base income amount, is less than $7.25 per hour, the employer must pay the employee the difference. 29 U.S.C. § 203(m)(2). The statute allows tipped employees to pool their tips, but employers may not require them to do so. A New Jersey wage and hour lawyer can help you bring a claim if your employer instituted an improper tip pooling program.

In December 2017, the DOL published a proposed rule that would remove restrictions on employers’ control over tips paid by customers, essentially allowing them to require tip pooling. 82 Fed. Reg. 57395 (Dec. 5, 2017). The DOL claimed that this would allow a more fair allocation of tip income among employees, including cooks and dishwashers who do not ordinarily receive tip income. Since the proposed rule would only apply to employers that already pay tipped employees at or above the minimum wage, critics alleged that the rule would allow employers to pocket any tip income above the minimum wage threshold. The proposed rule received more than 218,000 comments from the public.

The TIP Act, introduced in Congress as H.R. 5180 on March 6, 2018, appeared to address the DOL’s proposed rule directly. It would have amended § 203(m) to specify that, unless tipped employees have voluntarily decided to pool tips, “all tips received by any employee…shall be the property of, and retained by, the employee.” H.R. 5180 §2(2) (115th Congress, Mar. 6, 2018). This would apply to both tipped and non-tipped employees. The bill was referred to the House Education and Workforce Committee, and it has seen no additional action since.

Instead of the TIP Act’s affirmation of employees’ rights to the tips they receive, the CAA prohibits employers from retaining employee tips. It amends § 203(m) to state that “[a]n employer may not keep tips received by its employees for any purposes.” Pub. L. 115-141 § 1201(a) (Mar. 23, 2018). It also amends 29 U.S.C. § 216 to allow aggrieved employees to recover damages.

If you and an employer are involved in a dispute in New Jersey or New York, the Resnick Law Group’s overtime litigation attorneys are available to help you. Contact us online, at 973-781-1204, or at (646) 867-7997 today to schedule a confidential consultation with a member of our team.

More Blog Posts:

U.S. Department of Labor Issues New Rules Regarding When FLSA Covers Interns in New Jersey, The New Jersey Employment Law Firm Blog, February 23, 2018

New Jersey Lawsuits Allege Failure to Pay Overtime Wages, The New Jersey Employment Law Firm Blog, December 8, 2017

New York Court Rules on Overtime Pay for Home Care Workers, The New Jersey Employment Law Firm Blog, December 4, 2017

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