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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Proposed Rules that are contrary to the FLSA and the CAA, including the 2020 Tip final rules revisions to portions of its CMP
regulations on willful violations, and the rules imposition of a willfulness requirement for CMPs for section 3m2B violations. The complaint also asserts that the 2020 Tip final rules provisions on managers and supervisors improperly prevent certain lower-paid managers and supervisors who perform tipped work from receiving tips.
Delaying the effective date of the 2020
Tip final rule gave the Department the opportunity to review and consider the rule in light of the issues raised by that complaint.
Several commenters responded to the Departments February 5, 2021 proposal to delay the effective date of the 2020
Tip final rule and requesting comments on the merits of the rule, urging the Department to reconsider the 2020 Tip final rules revisions to portions of its CMP regulations on willful violations and incorporation of the CAAs language regarding CMPs for section 3m2B violations into the Departments regulations. See 86 FR
11632.8 These commenters also stated that the Department should consider the issues of law raised in the Pennsylvania v. Scalia complaint.
In light of the comments and upon review and reconsideration of the questions of law, policy, and fact raised by the 2020 Tip final rule, the Department now believes that it is appropriate to revisit a few portions of the final rule. Specifically, the Department is concerned that the 2020
Tip final rule inappropriately circumscribed the Departments discretion to assess CMPs for violations of 3m2B, by restricting those CMPs to only repeated or willful violations, notwithstanding that the statute does not limit CMPs related to tips in such a way. Instead, the CAA
gives the Department authority to assess such CMPs as the Secretary determines appropriate. In addition, the Department believes that further modifications to the 2020 Tip final rules revisions to its CMP regulations on willful violations may be necessary to align these regulations with Supreme Court and appellate court decisions; in particular, the Department believes that it may be necessary to restore guidance regarding when an employers violation may show reckless disregard of the Acts requirements. The Department is therefore proposing to withdraw and repropose the two CMP portions of the 2020 Tip final rule and, in a second 8 Two commenters opposed delaying the effective date of the 2020 Tip final rule. 86 FR 11632.

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NPRM, has proposed to further delay the effective date of these portions of the 2020 Tip final rule to allow for this rulemaking.
The Department is also considering whether to revise language in the 2020
Tip final rule regarding managers or supervisors whom section 3m2B
prohibits from keeping employees tips.
The Department is considering whether the 2020 Tip final rules language regarding managers or supervisors could be revised to better address the fact that some managers and supervisors perform a substantial amount of tipped work.
The Department is also considering whether this language could be revised to provide additional flexibility for employers to allow managers and supervisors who meet the duties test in 29 CFR 541.100a24 or 29 CFR
541.101 and perform tipped work to contribute to employer-mandated tip pools, but not receive other employees tips from such tip pools.
IV. Proposed Regulatory Revisions A. Civil Money Penalties for Violations of Section 3m2B
Section 16e of the FLSA, 29 U.S.C.
216e, establishes CMPs for certain violations of the Act. The CAA amended FLSA section 16e2 to add new penalty language for employers who violate section 3m2B by keeping employees tips. The new CMP
provision states that: Any person who violates section 3m2B shall be subject to a civil penalty not to exceed $1,100 9 for each such violation, as the Secretary determines appropriate, in addition to being liable to the employee or employees affected for all tips unlawfully kept . . . Unlike the statutory provisions in section 16e2
regarding CMPs for minimum wage and overtime violations, the statute does not limit the assessment of CMPs to repeated or willful violations of section 3m2B. Instead, the new penalty language subjects persons who violate 3m2B to civil penalties as the Secretary determines appropriate.
Shortly after the passage of the CAA, the Department issued FAB No. 2018
3 Apr. 6, 2018, explaining that the Department would follow its normal procedures, in enforcing the new CMPs including by determining whether the violation is repeated or willful. The Departments 2020 Tip final rule 9 The CMP amount in the final rule was adjusted to $1,162 for inflation, as required by the Federal Civil Penalties Inflation Adjustment Act of 1990
Pub. L. 101410, as amended by the Debt Collection Improvement Act of 1996 Pub. L. 104
134, sec. 31001s and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015
Pub. L. 11474, sec. 701.

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adopted this guidance. The 2020 Tip final rule incorporates CMPs into the Departments existing CMP regulations at 29 CFR parts 578, 579, and 580;
applies the same considerations for determining the amount of a CMP for a violation of 3m2B as the Department uses for determining the amount of CMPs for minimum wage and overtime violations; and adopts for CMPs for violations of 3m2B the same longstanding rules and procedures already in place for CMPs for other FLSA violations. In addition, the 2020
Tip final rule would codify in regulation the Departments current enforcement policy of assessing CMPs for section 3m2B violations only after determining that a violation is repeated or willful. The Department explained in the 2020 Tip final rule that applying the same rules and procedures for CMPs for violations of 3m2B as the Department applies for CMPs for other FLSA violations created consistent enforcement procedures. See 85 FR
86773.
In response to the Departments proposal to extend the effective date of the 2020 Tip final rule, several commenters asked the Department to revisit language in the rule limiting the Departments ability to assess CMPs for section 3m2B violations to only repeat or willful violations. These commenters asserted that, because section 16e2 specifically limits minimum wage and overtime CMPs to repeated and willful violations, but does not specifically limit the assessment of tip CMPs, the statute evinces Congress intent that the assessment of tip CMPs is not predicated on a repeated or willful violation. See, e.g., National Employment Law Project NELP;
National Womens Law Center; see also State Attorney Generals.
Although the 2020 Tip final rule acknowledged the Departments discretion to assess CMPs for violations of section 3m2B, the 2020 Tip final rule circumscribed this discretion by limiting CMPs for violations of section 3m2B to only repeated or willful violations. Upon reevaluating this issue in light of the statutory language, however, the Department is concerned that it is inappropriate to circumscribe its discretion through regulation.
Accordingly, the Department proposes to withdraw the CMP language for violations of 3m2B from the 2020
Tip final rule and adopt regulatory language in 29 CFR 578.3ab, 578.4, 579.1, 580.2, 580.3, and 580.12, and 580.18b3 so that the Department is not limited in its assessment of CMPs to only repeated and willful violations of section 3m2B. This approach would
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