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Federal Register / Vol. 86, No. 37 / Friday, February 26, 2021 / Rules and Regulations of the President, directed the heads of Executive Departments and Agencies to consider delaying the effective dates of all regulations that had been published in the Federal Register but had not yet taken effect; the Tip Rule falls into this category. The Regulatory Freeze Memorandum states that the purpose of such delays is for agencies to review any questions of fact, law, and policy that the rules may raise. The memorandum notes certain exceptions that do not apply here. On January 20, 2021, the Office of Management and Budget OMB also published OMB
Memorandum M2114, Implementation of Memorandum Concerning Regulatory Freeze Pending Review, which provides guidance regarding the Regulatory Freeze Memorandum. See M2114, Implementation of Memorandum Concerning Regulatory Freeze Pending Review, https www.whitehouse.gov/
wp-content/uploads/2021/01/M-21-14Regulatory-Review.pdf last visited Feb.
19, 2021. OMB Memorandum M2114
explains that pursuant to the Regulatory Freeze Memorandum, agencies should consider postponing the effective dates for 60 days and reopening the rulemaking processes for rules that have not yet taken effect and about which questions involving law, fact, or policy have been raised. Id. In accordance with the Regulatory Freeze Memorandum and OMB Memorandum M2114, on February 5, 2021, the Department published in the Federal Register the proposed delay of the effective date for the Tip Rule 86 FR
8325 by 60 days to April 30, 2021.
The Department explained that delaying the effective date of the Tip Rule would provide the Department additional opportunity to review and consider the questions of law, policy, and fact raised by the rule, as contemplated by the Regulatory Freeze Memorandum and OMB Memorandum M2114, before the rule goes into effect. The Department added that it could consider whether the Tip Rule properly implements the CAA
Amendments to section 3m of the FLSA, which prohibit employers from keeping tips for any purpose; whether the Tip Rule adequately considered the possible costs, benefits, and transfers between employers and employees related to the codification of its guidance regarding the tip credits application to tipped employees who perform tipped and non-tipped duties;
and whether the Tip Rule otherwise effectuates the CAA amendments to the FLSA, including the statutory provision for civil money penalties for violations
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of section 3m2B of the Act.
Additionally, on January 19, 2021, Attorneys General from eight states and the District of Columbia filed a complaint for declaratory and injunctive relief in the United States District Court for the Eastern District of Pennsylvania, in which they argued that the Department violated the Administrative Procedure Act in promulgating the Tip Rule.1 The complaint argues that the Tip Rule makes several changes to the Departments regulations that are contrary to the FLSA and the CAA, specifically, the Tip Rules codification of WHDs guidance regarding the tip credits application to tipped employees who perform tipped and non-tipped duties, the rules revisions to portions of its Civil Money Penalty CMP
regulations on willful violations, and the rules imposition of a willfulness requirement for CMPs for section 3m2B violations, and it argues that the Department failed to justify the changes made in the Tip Rule or consider the impact of these changes on workers. The delay of the Tip Rules effective date would also give the Department the opportunity to review and consider the rule in light of the issues raised by that complaint.
The Department invited public comment on the proposed delay. The comment period ended on February 17, 2021.
II. Comments and Decision A total of 19 organizations timely commented on the notice of proposed rulemaking NPRM 86 FR 8325, February 5, 2021 during the 12-day comment period that ended on February 17, 2021, which may be viewed on www.regulations.gov, document ID
WHD201900040475. The Department received comments from a broad array of stakeholders, including Attorneys General from eight states and the District of Columbia, a law firm, industry groups, non-profit organizations, and advocacy organizations. Seventeen commenters supported the Departments proposal to delay the Tip Rules effective date. Two of the commenters opposed the proposed delay.
Supporters of the proposed delay in the Tip Rules effective date stated that the rule raises questions of law, policy, and fact that warrant further review and consideration by the Department in accordance with the Regulatory Freeze Memo. Advocacy organizations such as the National Employment Law Project NELP, Network Lobby for Catholic 1 Commonwealth of Pennsylvania et al. v. Scalia et al., No. 2:21cv00258 E.D. Pa., Jan. 19, 2021.

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Social Justice, and the National Womens Law Center stated that the Department should specifically reconsider the following changes, which they argued are harmful to workers and inconsistent with the FLSA and the CAA amendments: The Tip Rules codification of WHDs guidance regarding the tip credits application to tipped employees who perform tipped and non-tipped duties; the Tip Rules revisions to portions of its CMP
regulations on willful violations; and the Tip Rules incorporation of the CAAs language regarding CMPs for section 3m2B violations into the Departments regulations. Advocacy organizations and Attorneys General for eight states and the District of Columbia also stated that the Department should consider the issues of law raised in the January 19, 2021 complaint.
The Economic Policy Institute supported the proposed delay because it would give the Department time to reassess the Tip Rules analysis of the economic impact of codifying WHDs guidance regarding the tip credits application to tipped employees who perform tipped and non-tipped duties, which it argued was flawed. Multiple commenters, such as Restaurant Opportunities Center United and the Leadership Conference on Civil Rights, stated that the Department should delay the Tip Rule in light of the COVID19
pandemic, indicating that tipped workers have been particularly harmed by the pandemic and that it has led to a restructuring of the restaurant industry. Additionally, NELP stated that a delay in the Tip Rules effective date is appropriate to avoid additional compliance costs and training that employers would incur if the rule becomes effective and then is revised by the Department after its review.
Two commenters opposed any delay in the effective date. The Center for Workplace Compliance CWC stated that it does not believe a delay in the Tip Rules effective date is necessary; it largely dedicated its comment to explaining why it supports the Rule.
The Department disagrees; as discussed below, the Department concludes that supporters of the proposed delay have identified issues of fact, law, and policy raised by the Tip Rule that merit further review in accordance with the Regulatory Freeze Memo. The National Federation of Independent Businesses NFIB expressed its support for the Tip Rule as well, and stated that instead of delaying the rules effective date, the Department should allow it to go into effect and then consider whether to propose any changes. The Department disagrees with this approach. Allowing
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