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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Proposed Rules
number of firms to estimate a potential range for regulatory familiarization costs. The lower bound of the range is calculated assuming that one specialist per firm will review the rule, and the upper bound of the range assumes one specialist per establishment.
The most recent data on private sector entities at the time this NPRM was drafted are from the 2017 Statistics of U.S. Businesses SUSB.21 The
Department limited this analysis to a few industries that were acknowledged to have tipped workers in the 2020 Tip final rule. These industries are classified under the North American Industry Classification System NAICS as 713210 Casinos, 721110 Hotels and Motels, 722410 Drinking Places Alcoholic Beverages, 722511 Fullservice Restaurants, 722513 Limited Service Restaurants, and 722515 Snack
and Nonalcoholic Beverage Bars. The Department understands that there may be entities in other industries with tipped workers who may review this rule, and welcomes data and information on other industries that should be included in this analysis. See Table 1 for a list of the number of firms and establishments in each of these industries.

. T10oedid Tabl e 1 Firms an d E stabl1shments m n ustnes Industry
Firms
Establishments
221

292

42,795

53,869

NAICS 713210 Casinos NAICS 721110 Hotels and Motels NAICS 722410 Drinking Places Alcoholic Beverages
39,323

40,156

NAICS 722511 Full-Service Restaurants
217,111

250,871

NAICS 722513 Limited Service Restaurants
157,353

251,000

NAICS 722515 Snack and Nonalcoholic Beverage Bars
47,112

65,010

503,915

661,198

Total
Source: Statistics of U.S. Businesses 2017

21 Statistics of U.S. Businesses 2017, https
www.census.gov/data/tables/2017/econ/susb/2017susb-annual.html, 2017 SUSB Annual Data Tables by Establishment Industry.

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$50.60 0.25 hours. The Department estimates that all regulatory familiarization costs would occur in Year 1.
Additionally, the Department estimated average annualized costs of this proposed rescission over 10 years.
Over 10 years, it would have an average annual cost of $0.8 million to $1.1
million, calculated at a 7 percent discount rate $0.7 million to $0.9
million calculated at a 3 percent discount rate. All costs are in 2019
dollars.
D. Benefits This NPRM proposes to revise portions of the Departments CMP
regulations regarding when a violation of section 6 minimum wage or section 7 overtime of the FLSA is willful, and thus subject to a CMP under section 16e. As discussed above, these portions of the Departments regulations are based on McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 1988, which held that a violation is willful if the employer knew or showed reckless disregard. This NPRM proposes to modify the CMP regulations to clarify that multiple circumstances can be sufficient to show a knowing violation of section 6 or 7. The Department also proposes to reinsert language in the CMP regulations to address the meaning 22 Occupational Employment and Wages, May 2019, https www.bls.gov/oes/current/
oes131141.htm.

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of reckless disregard. The Department believes that these proposed revisions will better align its CMP regulations with how it actually litigates willfulness and make clearer to the regulated community when a violation is knowing or in reckless disregard and thus willful.
This increased clarity will enable employers to better understand when they may be subject to a CMP for violating the FLSAs minimum wage or overtime requirements, which may enhance the penaltys deterrent effect.
This NPRM also proposes to replace regulatory language in its CMP
regulations so that the Department is not limited in its assessment of tip CMPs to only repeated and willful violations of section 3m2B. This change is consistent with the text of section 16e of the FLSA, which provides that any person who violates section 3m2B
shall be subject to a civil penalty . . .
for each such violation, as the Secretary determines appropriate. 29 U.S.C.
216e. The Department believes that this change, by ensuring that the Department has the ability to impose CMPs for violations of section 3m2B when it deems appropriate, can help improve the enforcement of the statute, potentially discourage more employers from violating the FLSA, and better ensure that employees keep the tips they receive.
23 The benefits-earnings ratio is derived from the Bureau of Labor Statistics Employer Costs for Employee Compensation data using variables CMU1020000000000D and CMU1030000000000D.

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The Department believes 15 minutes per entity, on average, to be an appropriate review time for this proposed rule, because most of the information related to the CAA
amendments that employers would have to familiarize themselves with was already captured in the 2020 Tip final rule. The changes in this proposed rule are small, and some are consistent with the Departments existing enforcement.
This review time represents an average of employers who will spend less than 15 minutes reviewing, and others who will spend more time.
The Departments analysis assumes that the proposed rescission would be reviewed by Compensation, Benefits, and Job Analysis Specialists SOC 13
1141 or employees of similar status and comparable pay. The median hourly wage for these workers was $31.04 per hour in 2019, the most recent year of data available.22 The Department also assumes that benefits are paid at a rate of 46 percent 23 and overhead costs are paid at a rate of 17 percent of the base wage, resulting in a fully loaded hourly rate of $50.60.
The Department estimates that the lower bound of regulatory familiarization cost range would be $6,374,525 503,915 firms $50.60
0.25 hours, and the upper bound, $8,364,155 661,198 establishments