Major Provisions of Final Tip Pool Rule Become Effective April 30, 2021

Three main provisions of the US Department of Labor’s final tip pool rule take effect April 30, 2021. Other parts of the rule are delayed and could be further revised by the Biden Administration. For a complete discussion of the final rule, issued on December 22, 2020, please see Lake Effect’s prior blog on this topic.

The following provisions of the final tip pool rule take effect April 30, 2021:

  • Employers, managers, and supervisors are prohibited from sharing or keeping any portion of tips received by employees; this prohibition applies regardless of whether the employer takes a tip credit and regardless of the type of tip pool implemented.
  • Employers who do not take a tip credit have two options for tip pooling. Employers may create a “traditional tip pool” and/or a “nontraditional tip pool,” which includes employees who do not regularly receive tips, such as cooks and dishwashers. Employers who take a tip credit can only create a traditional tip pool.
  • An employer who takes a tip credit or creates either type of tip pool must identify on its payroll records each employee who receives tips and maintain records of the weekly or monthly amount of tips reported by each employee.

The effective date of the remaining provisions of the final tip pool rule has been delayed until December 31, 2021. Those delayed provisions address:

  • The assessment of civil monetary penalties against employers who “willfully” or otherwise violate the FLSA’s prohibition against keeping employee tips.
  • The application of the FLSA tip credit to tipped employees who perform tipped and non-tipped duties. The effective date of these provisions is delayed until December 31, 2021.

Lake Effect is here to answer your questions about federal and state wage and hour laws that impact employers across all industries.  We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at or 1-844-333-5253.

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