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September 17, 2020

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Department Of Labor To Rescind 2011 Tip Pooling Regulation

Today the Trump Administration, through the Office of Management and Budget’s Office of Information and Regulatory Affairs, released the federal government’s semi-annual Unified Agenda of Regulatory and Deregulatory Actions. This agenda provides public notice of the regulatory actions the various agencies of the Executive Branch anticipate taking in the coming year. Among the items listed for the Department of Labor is a matter for the Department’s Wage and Hour Division entitled “Tip Regulations Under the Fair Labor Standards Act (FLSA),” Regulation Identifier Number 1235-AA21. The agenda notes that current “regulations limit an employer’s ability to use an employee’s tips regardless of whether the employer takes a tip credit under Section 3(m) [of the FLSA] or instead pays the full FLSA minimum wage directly to the employee” and that “the Department will propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.” The agenda contemplates issuing a Notice of Proposed Rulemaking in August 2017.

The rule under consideration would reverse a controversial position taken during the Obama Administration in 2011 when, in response to a federal appellate court decision concluding that the FLSA imposes no restrictions on tip pools where employers pay full minimum wage, the Department issued regulations expressly limiting the use of tip pools even when employers pay the full minimum wage to all employees. See Updating Regulations Issued Under the Fair Labor Standards Act, 76 Fed. Reg. 18,832 (Apr. 5, 2011). That ruling has spawned a number of lawsuits and is currently before the Supreme Court in two certiorari petitions, Nos. 16-163 and 16-920. The Department’s decision to rescind the regulation appears to reflect a recognition that the position taken in the prior administration is vulnerable to legal challenge, as well as a broader concern that if the Supreme Court takes the case up it could lead to a significant reining in of the authority of Executive Branch agencies to issue regulations in the absence of clear statutory permission to do so. The government’s brief in No. 16-920 is currently due on September 8, 2017.

Jackson Lewis P.C. © 2020National Law Review, Volume VII, Number 201

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