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Federal Register / Vol. 86, No. 56 / Thursday, March 25, 2021 / Proposed Rules corresponding language in 579.2 to state that the employers receipt of advice from a responsible official of the Wage and Hour Division to the effect that the conduct in question is not lawful, among other situations, can be sufficient to show that the employers conduct is knowing, but is not automatically dispositive. These revisions would resolve the tensions identified within 578.3c and between 578.3c2 and Richland Shoe and would comport more closely with how the Department litigates willfulness.
The Department proposes to add among other situations to these sections, restoring language that was in 578.3c2 and the corresponding language in 579.2 prior to the 2020 tip final rule, to make it clear, consistent with considering all of the facts and circumstances, that evidence other than the employers receipt of advice from WHD that its conduct was unlawful can be sufficient to show that the violation was knowing and thus willful.
The Department additionally proposes to reinsert 578.3c3 and corresponding language in 579.2
addressing the meaning of reckless disregard. Those proposed provisions state that reckless disregard of the requirements of the Act means, among other situations, that the employer should have inquired further into whether its conduct was in compliance with the Act and failed to make adequate further inquiry. Upon further consideration, the Department believes that it necessary to provide an explanation of what reckless disregard means rather than deleting 578.3c3 and the corresponding language in 579.2 altogether. Deleting those provisions could suggest that an employers failure to make adequate further inquiry into the lawfulness of its conduct when it should have may not constitute reckless disregard. The 2020
Tip final rule stated that the scenario where the employer should have inquired further but did not do so adequately is tantamount to reckless disregard, 13 but actually deleting 578.3c3 and the corresponding language in 579.2 could suggest otherwise. Moreover, by explaining what reckless disregard means and also removing the shall be deemed language, the provisions proposed here would resolve the tensions identified within 578.3c and between 578.3c3 and Richland Shoe and would, consistent with considering all of the facts and circumstances, not foreclose consideration of relevant evidence. Finally, including the among 13 Id.

citing Davila, 717 F.3d at 1185.

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other situations language would indicate that reckless disregard could be proven by showing something other than the employer should have inquired further but did not do so adequately, as 578.3c3 and the corresponding language in 579.2 provided prior to the 2020 Tip final rule.
The Department welcomes comments on all aspects of this proposal regarding 578.3c2 and 3 and the corresponding language in 579.2.
C. Managers and Supervisors The 2020 Tip final rule makes several changes to the Departments regulations to address the statutory term managers and supervisors. These changes will go into effect on April 30, 2021.14 Section 531.52b2 of the 2020 Tip final rule reiterates the prohibition in section 3m2B that an employer may not allow managers and supervisors to keep any portion of an employees tips, regardless of whether the employer takes a tip credit. Consistent with the FAB issued shortly after the passage of the CAA and the Departments NPRM
for the 2020 Tip final rule, 531.52b2
of the 2020 Tip final rule defines managers and supervisors to mean any employee whose duties match those of an executive employee as described in 541.100a2 through 4 or 541.101
of this chapter. See FAB No. 20183;
84 FR 53956 Oct. 8, 2019; 85 FR 86789
Dec. 30, 2020. Section 531.54c3 and d of the 2020 Tip final rule prohibit employers from including such managers and supervisors in mandatory tip pools. The Preamble accompanying the 2020 Tip final rule interprets 531.54c3 and d to preclude managers and supervisors from contributing, as well as receiving, tips from mandatory tip pooling or sharing arrangements. 85 FR 86764.
In the 2020 rulemaking, the Department received comments from parties representing both employers and workers expressing concern that prohibiting managers or supervisors from receiving tips from mandatory tip pools could prevent lower-paid managers or supervisors who perform a substantial amount of service work from keeping tips. The Pennsylvania v. Scalia complaint also expressed this concern, noting that the 2020 Tip final rules prohibition against managers or 14 These sections were scheduled to go into effect on March 1, 2021, but on February 26, 2021, the Department delayed the 2020 Tip final rules effective date to April 30, 2021, in order to give the Department additional time to consider issues of law, policy, and fact that warranted additional review, consistent with the January 20, 2021
memorandum from the Assistant to the President and Chief of Staff, titled Regulatory Freeze Pending Review. See 86 FR 7424.

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supervisors who meet the executive employee duties test from participating in mandatory tip pools is overbroad and will exclude certain low wage workers from access to tip pools. 15 In response to concerns from commenters about managers and supervisors who also perform tipped work, the Department added this language to 531.52b2 in the 2020 Tip final rule:
A manager or supervisor may keep tips that he or she receives directly from customers based on the service that he or she directly provides. The Department is interested in whether it should make adjustments to this language to better address managers or supervisors who also engage in a substantial amount of tipped work.
Although the Department is not proposing specific changes to the regulatory text at this time, the Department invites comment on possible modifications to the language in 531.52b2 clarifying that managers may keep tips that they receive directly from customers for the service that they directly provide.
Specifically, the Department requests comments on the following:
1. How common is it for managers or supervisors who satisfy the duties test to perform tipped work? Please describe when and how this occurs, including how regularly and frequently this occurs. Does the extent to which managers or supervisors perform tipped work vary based on different industries or different types of establishments within an industry? If, in a given establishment, some managers or supervisors perform tipped work and others do not, please describe this arrangement.
2. Prior to the CAA amendments, how common was it for tipped managers or supervisors who satisfy the duties test to participate in tip pools or tip sharing arrangements? Please describe when and how this occurred.
3. Is the language in 531.52b2
that permits managers and supervisors to keep tips they receive directly from customers based on the service that they directly provide sufficient to allow tipped managers and supervisors to collect all the tips they have earned from their customer service work?
4. How common is it for tips provided to a manager or supervisor to be commingled with tips provided to other tipped employees? Please describe when and how this would occur. Does this vary based on different industries or different types of establishments within in an industry?
15 Commonwealth of Pennsylvania et al. v. Scalia et al., No. 2:21cv00258 E.D. Pa., Jan. 19, 2021.

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