Submitted via https://www.regulations.gov/document/WHD-2019-0004-0496
Re: RIN 1235-AA21, Comments in Response to Proposed Rule, Tip Regulations Under the Fair Labor Standard Act (FLSA); Partial Withdrawal
Dear Ms. DeBisschop:
The National Employment Lawyers Association (NELA) writes in response to the United States Department of Labor’s (“the Department’s”) Notice of Proposed Rulemaking (“NPRM”), whereby the Department proposes to withdraw and re-propose portions of the 2020 Tip Regulations Under the Fair Labor Standards Act (“FLSA”) (“2020 Tip Rule”), removing the requirement that violations of Section 3(m)(2)(B) of the FLSA must be “repeated or willful” for the Department to impose a civil monetary penalty. The NPRM also maintains the portion of the 2020 Tip Rule stating that an employer’s failure to heed warnings and advice of the Wage and Hour Division (“WHD”) that conduct is unlawful may constitute a knowing (and therefore willful) violation but does not create a presumption of a willful violation of the law. The Department further solicits comment on whether to revise other aspects of the 2020 Tip Rule, including the portions of the rule addressing “managers or supervisors” and the recordkeeping requirements.
NELA has an important interest in the Department’s proposal. NELA is the largest professional membership organization in the country comprised of attorneys who represent workers in labor, employment, and civil rights disputes. Founded in 1985, NELA advances employee rights and serves lawyers who advocate for equality and justice in the American workplace. NELA and its 69 circuit, state, and local affiliates have a membership of over 4,000 attorneys who are committed to working on behalf of those who have been treated illegally in the workplace. NELA members represent thousands of workers from around the country in wage theft cases in every state and circuit, which provides NELA with an important and insightful perspective on how issues surrounding tipping affect workers, especially those paid far below the minimum wage who rely on tipped wages to make a living. NELA members also have the experience to comment on the impacts the Department’s proposal will have on these workers and on enforcement of our nation’s wage theft laws.
The federal minimum wage for tipped workers has been stuck at $2.13 since 1991, and even before the COVID-19 pandemic, median hourly earnings for people working in common tipped jobs like restaurant server and bartender were less than $12, including tips, while poverty rates for tipped workers were more than twice as high as rates for working people overall. Women—disproportionately women of color—represent more than two-thirds of tipped workers nationwide, and are even more likely to experience poverty than their male counterparts. And the Department routinely identifies significant wage violations in industries with large concentrations of tipped workers. Strengthening protections for people working in tipped jobs should thus be a priority for the Department.
For the reasons outlined below, we support the Department’s removal of the requirement that a violation of section 3(m)(2)(B)—which bars employers from taking workers’ tips—be repeated or willful to impose a penalty, but urge the Department to further revise the definition of willfulness applied elsewhere in the regulations to establish a rebuttable presumption that an employer’s action is willful in certain scenarios. We have also included brief recommendations regarding the other issues on which the Department seeks comment.
I. The NPRM appropriately removes the requirement that violations of section 3(m)(2)(B) be willful or repeated for the Department to impose a civil monetary penalty.
The Department’s withdrawal of the portion of the 2020 Tip Rule requiring willful or repeated violations of section 3(m)(2)(B) before the Department may impose civil penalties aligns with the plain language of the FLSA and Congress’s legislative intent. This intent was made clear when Congress deliberately required in the civil penalties section of the FLSA that minimum wage and overtime violations occur “repeatedly and willfully” before penalties apply, but declined to include this heightened requirement for violations of the section added at 3(m)(2)(B), which bars employers from keeping any portion of employees’ tips.
The 2020 Tip Rule inappropriately imported a repetition/willfulness requirement into section 3(m)(2)(B), contrary to the plain language of the statute, and the present NPRM correctly withdraws that portion of the Rule.
II. Adding a rebuttable presumption of an employer’s willful violation in certain scenarios is appropriate and consistent with existing FLSA regulations and case law.
Under 29 C.F.R. §§ 578.3(c) and 579.2, “willful” is defined as knowing that conduct is prohibited by the law or showing a reckless disregard for the law. For decades, the Department’s regulations have thus provided two examples of scenarios in which knowledge or reckless disregard for the law are so clear as to render further analysis unnecessary to reach a finding of willfulness: 1) an employer’s conduct is knowing if WHD informed the employer that the conduct was unlawful, and 2) an employer’s conduct shows reckless disregard for the law if the employer should have inquired further into whether its conduct was lawful, and failed to do so.
We understand the Department’s concern that the longstanding regulatory language indicating that an employer’s conduct “shall be deemed” knowing or reckless in such scenarios may be in tension with language elsewhere in FLSA regulations and in precedent requiring that “all of the facts and circumstances” be considered in determining whether a violation was willful. And we appreciate that in the present NPRM, the Department’s proposal affirms that these scenarios can be sufficient to establish knowledge or reckless disregard, in contrast to iterations of 29 C.F.R. §§ 578.3 and 579.2 proposed in prior phases of this rulemaking.
We do not believe, however, that the Department’s current proposal gives the proper weight to the examples of knowledge and reckless disregard described, which are clearly demonstrative of willfulness. Thus, we recommend that the Department establish a rebuttable presumption that a violation is knowing when an employer received notice from WHD that its conduct was unlawful, and that a violation is in reckless disregard of the law if the employer failed to make adequate inquiry into whether its conduct was compliant. The employer may still rebut the presumption if it presents sufficient contrary evidence—ensuring that the regulation still provides for consideration of all relevant facts and circumstances, while aligning more closely with the longstanding willfulness rules to promote consistency in application and certainty for employers.
III. Treatment of tips received by managers and supervisors.
As establishments employing tipped workers continue to evolve during the pandemic and its aftermath, it is important for the rules implementing section 3(m)(2)(B) to recognize these realities, and we appreciate the Department’s efforts to gain a more comprehensive understanding of the day-to-day experiences of workers and employers affected by the rules. Especially as restaurants and other service establishments have had to operate with reduced staff to both minimize risk of COVID-19 exposure and serve the smaller crowds required by public health protocols, it has become increasingly common for workers to take on a wider range of duties and/or greater flexibility in their roles.
With that in mind, we recommend that the Department amend its tip pooling regulations to clarify that an employer may either permit a manager/supervisor to keep any tip(s) received for service that the manager/supervisor directly provides, or require the manager to share it with other non-managerial/non-supervisory staff. However, such a policy—under which managers and supervisors who themselves receive tips could be required to pool or share them, but would not receive any portion of their colleagues’ tips—makes it all the more important that only employees who are bona fide managers and supervisors are classified as such.
Thus, we also recommend that the Department revisit the proposal previously raised by NELP, NWLC, et al., that the Department adopt a compensation level test to accompany the duties test for purposes of defining managers and supervisors. As in the overtime context, a compensation-level test administered in addition to the duties test would help to ensure that individuals who are categorically excluded from tip pools are bona fide managers or supervisors. Given that tip pooling typically arises in restaurant settings, we suggest that the Department set a threshold that corresponds to the median wage for “supervisors of food preparation and serving workers” (35-1010) based on the most recent National Occupational Employment and Wage Estimates from the U.S. Bureau of Labor Statistics, Occupational Employment Statistics (OES), which could be met on an annual or hourly basis. This level should be defined in regulation by reference to the OES source so that it is automatically adjusted each year; the current level, based on May 2020 data, is $35,900 annually or $17.26 per hour.
IV. Improving recordkeeping requirements.
We appreciate the Department’s concern that because the new regulations do not require that employers account for all tips that are contributed to a mandatory tip pool or tip sharing arrangement, it may be difficult for employees and for the Department to know if the employer is keeping tips, especially when the employer collects and distributes the tips in such an arrangement. This concern is warranted. We recommend that the Department strengthen the recordkeeping requirements in further rulemaking.
For example, we support the Department’s suggestion that the regulations require employers to keep a record of the total contributions to an employer-mandated tip pooling or tip sharing arrangement, and keep track of the total amount in tips that each employee receives from such an arrangement, in order to ensure that employers are not keeping tips and that all tips are distributed to employees. We recommend that the Department require employers to record this information as regularly as is feasible to facilitate enforcement—ideally, either each day or each workweek.
In addition, we recommend that the Department require employers to provide employees with notice of the structure of any mandatory tip pooling or tip sharing arrangement. This notice should be provided in writing at the time of an affected employee’s hire (or at the time the employer establishes the arrangement) and should explain who will be included in the tip pooling or tip sharing arrangement, the contributions required, and the method of distribution, as well as the employee’s hourly rate of base pay. The employer should be required to provide an updated notice to any affected employee upon any change to its terms, including the employee’s hourly pay rate.
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Thank you for your attention to these comments on a critical issue facing millions of workers. Please do not hesitate to reach out to Laura Flegel (firstname.lastname@example.org) with any questions.
Laura M. Flegel
National Employment Lawyers Association
Director of Legislative & Public Policy
 86 Fed. Reg. 15817.
 In 2019, median hourly wages, including tips, were $11.00 for waiters and waitresses and $11.39 for bartenders, the two largest groups of tipped workers. See U.S. Dep’t of Labor, Bureau of Labor Statistics, May 2019 National Occupational Employment and Wage Estimates, https://www.bls.gov/oes/current/oes_nat.htm (last visited Feb. 16, 2021). Tipped workers in other occupations have similarly low wages, such as barbers/hairstylists/cosmetologists ($12.63) and other personal appearance workers ($12.83). Id.
 See One Fair Wage: Women Fare Better in States with Equal Treatment for Tipped Workers, NWLC (Feb. 2021), https://nwlc.org/wp-content/uploads/2021/02/OFW-Factsheet-2021-v3.pdf.
 See generally, e.g., David Weil, Improving Workplace Conditions Through Strategic Enforcement (May 2010), https://www.dol.gov/whd/resources/strategicEnforcement.pdf.
 See 29 U.S.C. §216(e)(2); see also § 216(e)(1)(ii) (providing for doubling of CMP applicable to certain child labor violations “where the violation is a repeated or willful violation”).
 See McLaughlin v. Richland Shoe Co., 486 U.S. 128, 108 S. Ct. 1677 (1988) (citing Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 105 S. Ct. 613 (1985)).
 U.S. Dept’ of Labor, Bureau of Labor Statistics, Occupational Employment Statistics, May 2020 National Occupational Employment and Wage Estimates (March 2021), https://www.bls.gov/oes/current/oes_nat.htm (occupation code 35-1010).