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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Proposed Rules the statute, such that an employer can continue to take a tip credit for the time the tipped employee spends on such non-tipped work. The Departments test for determining when a tipped employee can continue to be paid with a tip credit when he or she is not performing tip-generating work has always been contained in subregulatory guidance. Given the serious concerns noted with this portion of the rulemaking, the Department believes that delaying the effective date of this portion of the 2020 Tip final rule so that it can fully consider the merits of these claims and to consider whether to engage in further rulemaking on this issue may be prudent before it codifies such a test for the first time into its regulations. For example, employers have already adjusted their practices to accommodate the Departments 2019
guidance addressing when they can continue to take a tip credit for tipped employees who perform non-tipped work that is related to their tipped occupation. It would be disruptive to these employers to adjust their practices to accommodate the new test articulated in the 2020 Tip final rule, and then have to readjust if that test does not survive judicial scrutiny or if the Department decides to propose a new test. Delaying the effective date while the Department undertakes its review, instead of allowing these portions of the rule to be implemented, addresses this concern and before employers change their practices to accommodate a new test that ultimately may not survive judicial scrutiny.
The Departments ongoing review of these three portions of the 2020 Tip final rule has identified similar concerns to those noted above, including potential legal issues and the sufficiency of the economic analysis for the third portion of the rule.
Accordingly, the Department believes that this proposed delay may best inform the Departments comprehensive review of these parts of the 2020 Tip final rule and consideration of alternate paths, and provide it a meaningful opportunity to do so, which is of paramount importance given the pending challenge to these parts of the rule in the Pennsylvania litigation.
The Department believes that the proposed delay of these three portions of the 2020 Tip final rule through December 31, 2021, is reasonable given the numerous issues of fact, law, and policy raised by these portions of the 2020 Tip final rule. In light of the claims raised in the Pennsylvania litigation and the comments received on the Delay NPRM, which highlight very serious concerns with the substance of the dual
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jobs portion of the 2020 Tip final rule and the process through which it was promulgated, as well as the two portions of the 2020 Tip final rule addressing CMPs, the Department believes additional action may be needed and it proposes to delay implementation of these portions of the rule until it determines an appropriate method to determine when a tipped employee is engaged in a tipped occupation and to conduct a rulemaking to ensure that the two CMP portions of the rule are consistent with the FLSA and Supreme Court precedent interpreting what constitutes a willful violation under that Act. As explained above, 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 three portions of the 2020 Tip final rule. Further, the three portions of the 2020 Tip final rule that the Department is proposing to delay also encompass those parts of the rule that are being challenged in the Pennsylvania lawsuit.
The Department has considered allowing these three portions of the rule to take effect pending its review and the assessment of potential new rulemaking;
however, the Department believes that the concerns discussed above call into question fundamental aspects of the rulemaking to such a degree that the best approach is to propose to delay these three portions of the rulemaking rather than allow them to take effect without seeking additional public input.
Relatedly, the Department preliminarily believes that delaying the effective date for these three portions of the rule will prevent confusion and uncertainty among the regulated community while the Department conducts its review.
Therefore, the Department believes that the prudent and reasonable approach is to propose to delay the effective date, and thus the implementation of these three portions of the 2020 Tip final rule while it undertakes its review. While the Department acknowledges that the proposed delay is significant, based on its initial review and given the concerns described above, it is clear that a significant amount of time is necessary to consider all aspects of these portions of the rulemaking. This proposed delay will allow the Department sufficient time to conduct rulemaking on two portions of the 2020 Tip final rule, and evaluate commenters concerns and
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consider whether to propose withdrawing and reproposing the third portion of the rule. The Department seeks public comment on the proposed delay, including whether it should delay the effective date for these portions of the 2020 Tip final rule and whether the proposed period of delay is an appropriate length of time or whether other lengths of time may be more appropriate. The Department specifically seeks comment on whether, rather than delaying implementation as proposed herein, the Department should allow these portions of the rule to take effect while it conducts its review and considers any new proposals to amend the regulations in question. The Department also invites the public to share any relevant knowledge and specific facts about any benefits, costs, or other impacts of this proposal on the regulated community, workers, and other relevant stakeholders. Lastly, the Department solicits comment on any other potential consequences of not delaying the effective date of these portions of the 2020 Tip final rule.
In sum, this NPRM seeks comment on the Departments proposal to further delay the effective date for three portions of the 2020 Tip final rule, to December 31, 2021, in order to complete the rulemaking published elsewhere in this issue of the Federal Register, and to further review and consider one additional portion of the 2020 Tip final rule. This NPRM also seeks comment on the substance of these three portions of the 2020 Tip final rule, and in particular, its amendment of the Departments dual jobs regulation to address the application of the FLSAs tip credit to tipped employees who perform both tipped and non-tipped duties. The remainder of the 2020 Tip final rule will 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.
IV. Executive Order 12866, Regulatory Planning and Review; and Executive Order 13563, Improved Regulation and Regulatory Review A. Introduction Under Executive Order 12866, OMBs Office of Information and Regulatory Affairs OIRA determines whether a regulatory action is significant and, therefore, subject to the requirements of the Executive Order and OMB review.17
Section 3f of Executive Order 12866
defines a significant regulatory action as a regulatory action that is likely to 17 See
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58 FR 51735, 51741 Oct. 4, 1993.

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