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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Proposed Rules
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enable staff at the Department to more easily search and retrieve specific content included in your comment for consideration. Anyone who submits a comment including duplicate comments should understand and expect that the comment will become a matter of public record and will be posted without change to https
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p.m. on the date indicated for consideration in this NPRM; comments received after the comment period closes will not be considered.
Commenters should transmit comments early to ensure timely receipt prior to the close of the comment period.
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For access to the docket to read background documents or comments, go to the Federal eRulemaking Portal at https www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Amy DeBisschop, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S
3502, 200 Constitution Avenue NW, Washington, DC 20210, telephone: 202
6930406 this is not a toll-free number. Copies of this NPRM may be obtained in alternative formats Large Print, Braille, Audio Tape or Disc, upon request, by calling 202 6930675 this is not a toll-free number. TTY/TDD
callers may dial toll-free 877 8895627
to obtain information or request materials in alternative formats.
Questions of interpretation or enforcement of the agencys existing regulations may be directed to the nearest WHD district office. Locate the nearest office by calling the WHDs tollfree help line at 866 4USWAGE 866
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SUPPLEMENTARY INFORMATION:
I. Executive Summary Section 3m of the FLSA allows an employer that satisfies certain requirements to count a limited amount of the tips received by its tipped
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employees as a credit toward the employers Federal minimum wage obligation known as a tip credit. See 29 U.S.C. 203m2A. In 2018, Congress passed the CAA, Public Law 115141, Div. S., Tit. XII, sec. 1201, 132
Stat. 348, 114849 2018, which amended section 3m. The CAA added a new statutory provision at section 3m2B which expressly prohibits employers from keeping employees tips for any purposes regardless of whether the employer claims a tip credit. This includes prohibiting managers or supervisors from keeping employees tips. The CAA also amended section 16e2 of the FLSA to give the Department discretion to impose civil money penalties CMPs up to $1,100
when employers unlawfully keep employees tips. On December 30, 2020, the Department issued a final rule that updates the Departments tip regulations to implement the CAA amendments.
The 2020 Tip final rule also makes other changes to the Departments regulations, including revising the definition of willful in the Departments CMP
regulations.
In this NPRM, the Department proposes to withdraw and repropose two portions of the 2020 Tip final rule and seeks comment on whether to revise another portion of the 2020 Tip final rule to address the CAA. The Department proposes to withdraw and repropose: 1 The portion of the 2020
Tip final rule incorporating the CAAs new provisions authorizing the assessment of CMPs for violations of section 3m2B of the Act; and 2 the portion of its CMP regulations addressing willful violations. In this NPRM, the Department also seeks comment on whether to revise the portion of the 2020 Tip final rule that addresses the statutory term managers or supervisors. Finally, the Department asks questions about how it might improve the recordkeeping requirements in the 2020 Tip final rule in a future rulemaking.1
This NPRM is related to a second NPRM, published elsewhere in this issue of the Federal Register, which proposes to further extend the effective date of three portions of the 2020 Tip final rule in order to complete rulemaking on two of the portions under this NPRM and to consider whether to withdraw and repropose a third portion of the 2020 Tip final rule not addressed in this NPRM, namely, the application 1 Those portions of the 2020 Tip final rule defining managers and supervisors and creating a new recordkeeping requirement applicable to employers that do not take a tip credit but collect employees tips will go into effect on April 30, 2021.

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of the FLSAs tip credit provision to tipped employees who perform both tipped and non-tipped duties. The second NPRM requests comments on both the delay of the effective date and on the substance of the portions of the rule that are being delayed.
II. Background A. Tips and Tip Pooling Section 6a of the FLSA generally requires covered employers to pay employees at least the Federal minimum wage, which is currently $7.25 per hour.
29 U.S.C. 206a. Section 3m2A
allows an employer to satisfy a portion of its minimum wage obligation to any tipped employee by taking a partial credit toward the minimum wage based on tips an employee receives. 29 U.S.C.
203m2A. An employer may take a tip credit only if, among other requirements, the tipped employee retains all the tips he or she receives. Id.
An employer taking a tip credit is, however, allowed to implement a mandatory traditional tip pool in which tips are shared only among employees who customarily and regularly receive tips. Id.
In 2011, the Department issued regulations interpreting what is now section 3m2A to prohibit employersregardless of whether the employer takes a tip creditfrom using employees tips other than as a credit against its minimum wage obligation to the employee, or in furtherance of valid traditional tip pools. See 76 FR 18832, 29 CFR 531.52 2011; 29 CFR 531.54
2011; 29 CFR 531.59 2011. The Department stated that, although the statutory language did not expressly address the use of an employees tips when an employer does not take a tip credit and pays a direct cash wage equal to or greater than the minimum wage, the regulations filled a gap in the statutory scheme. See 76 FR 1884142.
Several lawsuits followed that addressed the Departments authority to regulate employers that do not take a tip credit, as it did in the 2011 regulations.
In 2016, the Ninth Circuit upheld the validity of the 2011 regulations in Oregon Rest. & Lodging Assn ORLA v.
Perez, 816 F.3d 1080, 1090 9th Cir.
2016. The next year, however, the Tenth Circuit issued a conflicting decision, ruling that the 2011 tip regulations were invalid to the extent they regulated employers that pay a direct cash wage of at least the Federal minimum wage and do not take a tip credit. See Marlow v. New Food Guy, Inc., 861 F.3d 1157, 1159 10th Cir.
2017.

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