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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Proposed Rules States District Court for the Eastern District of Pennsylvania Pennsylvania complaint.2 The Department seeks comment on its proposed further delay of the effective date of these three portions of the 2020 Tip final rule. To further aid its review, the Department also seeks comments on these three portions of the 2020 Tip final rule, and in particular, on the merits of withdrawing or retaining the portion of the rule that amends the Departments dual jobs regulations to address the application of the FLSA tip credit to tipped employees who perform both tipped and non-tipped duties.
In another NPRM published elsewhere in this issue of the Federal Register the Department is proposing to withdraw and revise the two portions of the 2020 Tip final rule which address the assessment of CMPs under the FLSA: The regulations which address the statutory provision establishing CMPs for violations of section 3m2B of the Act, 578.3ab, 578.4, 579.1, 580.2, 580.3, and 580.12, and 580.18b3, and the portion of its CMP regulations which address when a certain violation is willful, 578.3c and 579.2.3
The Department is not proposing to further extend the remaining provisions of the 2020 Tip final rule not addressed in this NPRM. The remainder of the 2020 Tip final ruleconsisting of those portions addressing the keeping of tips and tip pooling,4 recordkeeping,5 and those portions making other minor changes to update the regulations to reflect the new statutory language and citations added by the CAA
amendments and clarify other references consistent with the statutory 2 See Commonwealth of Pennsylvania et al. v.
Scalia et al., No. 2:21cv00258, pp. 4243 E.D.
Pa., Jan. 19, 2021.
3 The sections of the 2020 Tip final rule related to CMPs that the Department is proposing to withdraw and revise are in 578.3, 578.4, 579.1, 579.2, 580.2, 580.3, 580.12 and 580.18 of part 29;
the third portion of the 2020 Tip final rule that the Department is continuing to consider are those regulations related to the tip credits application to tipped employees who perform tipped and nontipped duties, 10.28b and 531.56e of part 29.
The Department is not proposing to withdraw and reproprose the 2020 Tip final rules changes to the Departments CMP regulation at 578.1, which only generally references tip CMPs. To avoid confusion for the regulated community, however, the Department is delaying the effective date of the entire portion of its CMP regulations addressed in the 2020 Tip final rule. The Departments 2018
Field Assistance Bulletin explains the interim procedures that the Department is following in assessing tip CMPs. See Field Assistance Bulletin 20183 Apr. 6, 2018.
4 29 CFR 10.28c, ef; 531.50 through 531.52, 531.54.
5 29 CFR 516.28b.

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text 6will become effective upon the expiration of the first effective date extension, which extended the effective date of the 2020 Tip final rule through April 30, 2021.
III. Basis for Proposed Second Delay The Department is proposing this second delay of the effective date for three portions of the 2020 Tip final rule so that it has sufficient time to engage in a comprehensive review of these parts of the 2020 tip final rule, and to take further action as needed to complete its review. The Department believes that review of these three portions of the 2020 Tip final rule before they go into effect is particularly important given that the Pennsylvania litigants and individuals who submitted comments on the Departments Delay Rule raised significant substantive and procedural concerns regarding these three portions of the 2020 Tip final rule.
The Department has proposed to withdraw and repropose two portions of the 2020 Tip final rule relating to CMPs to better align them with the FLSA and Supreme Court caselaw. Allowing these provisions to go into effect could lead to practices the Department ultimately determines to be inconsistent with the FLSA and judicial opinions. In addition to causing confusion, this could result in increased compliance costs, and potentially disruptive changes in employment practices in the event that the Department withdraws and revises these portions of the 2020 Tip final rule.
The first portion of the 2020 Tip final rule that the Department is proposing to further delay addresses the assessment of CMPs for violations of section 3m2B of the FLSA, which prohibits employers, including managers and supervisors, from keeping tips. The CAA amended section 16e2 of the FLSA to provide for the assessment of CMPs for violations of section 3m2B as the Secretary determines appropriate. Notwithstanding this statutory grant of discretion, the 2020
Tip final rule would limit the Secretarys ability to assess CMPs for violations of 3m2B to those instances where the violation is repeated or willful. See, e.g., 85 FR
8677273. The Pennsylvania litigants argue that this portion of the 2020 Tip final rule addressing CMP assessments for violations of section 3m2B is inconsistent with the plain language of the statute and Congressional intent, noting that, unlike in the case of CMPs for minimum wage and overtime violations, Congress did not make the 6 29 CFR 531.50, 531.51, 531.52, 531.55, 531.56a, 531.56cd, 531.59, and 531.60.

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imposition of civil money penalties for violations of section 3m2B of the Act contingent upon a finding of willfulness. 7 Stakeholders who submitted comments in support of the Departments proposal to delay the effective date of the 2020 Tip final rule for 60 days expressed this same concern, similarly noting that section 16e2 of the FLSA does not require a finding of willfulness to assess a CMP
for a violation of section 3m2B. See, e.g., National Employment Law Project NELP; National Womens Law Center NWLC; NETWORK Lobby for Catholic Social Justice. Upon review of the Pennsylvania complaint and the comments received regarding its Delay Rule, the Department is concerned that the 2020 Tip Final rule unlawfully circumscribes its discretion to issue CMPs for section 3m2B violations.
Accordingly, as explained in the NPRM
published separately in this edition of the Federal Register, the Department is proposing to withdraw and repropose this part of the 2020 Tip final rule. To avoid codifying a limitation on the Departments ability to assess CMPs that may lack a basis in law, the Department believes that it may be necessary to delay that portion of the 2020 Tip final rule regarding CMPs for section 3m2B while it completes this rulemaking.
The second portion of the 2020 Tip final rule that the Department is proposing to further delay addresses those parts of the Departments FLSA
regulations which address when a violation of that Act is willful. The Departments definition of a willful violation in 578.3c and 579.2 of its regulations is based on the Supreme Courts opinion in 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 for whether its conduct was prohibited by the FLSA.
Among the concerns raised by the Pennsylvania litigants regarding this portion of the 2020 Tip final rule is the rules removal of language regarding the meaning of reckless disregard from these regulations.8 According to the Pennsylvania litigants, this and other changes to these regulations contradict the Supreme Courts long-established 7 See Commonwealth of Pennsylvania et al. v.
Scalia et al., No. 2:21cv00258, p. 98 E.D. Pa., Jan.
19, 2021.
8 See Commonwealth of Pennsylvania et al. v.
Scalia et al., No. 2:21cv00258, pp. 2324; see also p. 94 E.D. Pa., Jan. 19, 2021 The Final Rule also removes an employers failure to inquire further into whether its conduct was in compliance with the Act from the Departments description of willfulness.

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