Rule2024-29798
Tip Regulations Under the Fair Labor Standards Act (FLSA); Restoration of Regulatory Language
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 17, 2024
Effective
December 17, 2024
Issuing agencies
Labor DepartmentWage and Hour Division
Abstract
On October 29, 2021, the U.S. Department of Labor (Department) published a final rule (2021 Dual Jobs Rule) addressing the determination of when a tipped employee is employed in dual jobs under the Fair Labor Standards Act (FLSA or the Act). The 2021 Dual Jobs Rule took effect on December 28, 2021.On October 29, 2024, a federal appeals court issued an order vacating regulatory text from the Department's 2021 Dual Jobs Rule, with the effect of reinstating the Department's original FLSA regulation on the topic. In accordance with that court order, the Department is issuing this final rule to remove from the Code of Federal Regulations (CFR) the corresponding regulatory text that the Department promulgated through the 2021 Dual Jobs Rule and reinstate regulatory text as it existed in the CFR prior to the effective date of the 2021 Dual Jobs Rule. This action is a technical amendment accounting for changes in the law which have already occurred.
Full Text
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<title>Federal Register, Volume 89 Issue 242 (Tuesday, December 17, 2024)</title>
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[Federal Register Volume 89, Number 242 (Tuesday, December 17, 2024)]
[Rules and Regulations]
[Pages 101884-101887]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29798]
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Part 531
RIN 1235-AA44
Tip Regulations Under the Fair Labor Standards Act (FLSA);
Restoration of Regulatory Language
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Final rule; technical amendment.
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SUMMARY: On October 29, 2021, the U.S. Department of Labor (Department)
published a final rule (2021 Dual Jobs Rule) addressing the
determination of when a tipped employee is employed in dual jobs under
the Fair Labor Standards Act (FLSA or the Act). The 2021 Dual Jobs Rule
took effect on December 28, 2021.On October 29, 2024, a federal appeals
court issued an order vacating regulatory text from the Department's
2021 Dual Jobs Rule, with the effect of reinstating the Department's
original FLSA regulation on the topic. In accordance with that court
order, the Department is issuing this final rule to remove from the
Code of Federal Regulations (CFR) the corresponding regulatory text
that the Department promulgated through the 2021 Dual Jobs Rule and
reinstate regulatory text as it existed in the CFR prior to the
effective date of the 2021 Dual Jobs Rule. This action is a technical
amendment accounting for changes in the law which have already
occurred.
DATES: This rule is effective December 17, 2024.
FOR FURTHER INFORMATION CONTACT: Daniel Navarrete, Director of Division
of Regulations, Legislation, and Interpretation, Wage and Hour
Division, U.S. Department of Labor, Room S-3502, 200 Constitution
Avenue NW, Washington, DC 20210, telephone: (202) 693-0406 (this is not
a toll-free number). Alternative formats are available upon request by
calling 1-866-487-9243. If you are deaf, hard of hearing, or have a
speech disability, please dial 7-1-1 to access telecommunications relay
services.
SUPPLEMENTARY INFORMATION:
[[Page 101885]]
I. Background and Basis for the Restoration of Regulatory Text
Section 6(a) of the FLSA requires covered employers to pay
nonexempt employees a minimum wage of at least $7.25 per hour. See 29
U.S.C. 206(a). Since 1966, section 3(m) of the FLSA has permitted
employers that meet certain requirements to satisfy a portion of their
minimum wage obligation to a ``tipped employee'' by taking a partial
credit, commonly known as a ``tip credit,'' toward the minimum wage
based on the amount of tips that the tipped employee receives.\1\ An
employer that elects to take a tip credit cannot satisfy the entirety
of the minimum wage requirement with tips because the employer must pay
the tipped employee a direct cash wage of at least $2.13 per hour.\2\
Based on the current Federal minimum wage of $7.25 per hour, the
employer may claim a tip credit against its wage obligation of up to
$5.12 per hour towards its minimum wage obligation for a tipped
employee, provided--among other criteria--that the employee actually
receives sufficient tips to earn not less than the FLSA minimum wage.
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\1\ See Fair Labor Standards Amendments of 1966, Public Law 89-
601, sec. 101, 80 Stat. 830, 830 (1966); see also 29 U.S.C.
203(m)(2)(A).
\2\ See Fair Labor Standards Amendments of 1989, Public Law 101-
157, sec. 5, 103 Stat. 938, 941 (1989) (requiring employers to pay a
cash wage of at least ``50 percent of the [$4.25 per hour] minimum
wage rate after March 31, 1991''). Although subsequent FLSA
Amendments have increased the federal minimum wage, those amendments
did not change the $2.13 per hour minimum cash wage for tipped
employees, which has been in effect since April 1, 1991.
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Section 3(t) of the FLSA defines a ``tipped employee'' as ``any
employee engaged in an occupation in which [the employee] customarily
and regularly receives more than $30 a month in tips.'' \3\ The
Department promulgated the original FLSA regulations for tipped
employees in 1967, the year after Congress first created the tip credit
provision.\4\ As part of that rulemaking, the Department included a
``dual jobs'' provision, recognizing that an employee may be employed
by the same employer both in a tipped occupation and in a non-tipped
occupation, for example, ``where a maintenance man in a hotel also
serves as a waiter.'' 29 CFR 531.56(e) (1967).\5\ This provision
explained that an employee is a ``tipped employee'' for the purposes of
section 3(t) only while the employee is engaged in the tipped
occupation, and their employer may take a tip credit against its
minimum wage obligation only for the time the employee spends in that
tipped occupation. Id. At the same time, the regulation recognized that
tipped employees may perform ``related'' duties that are not
``themselves . . . directed toward producing tips,'' and used the
example of a server who ``spends part of her time'' performing non-
tipped duties, such as ``cleaning and setting tables, toasting bread,
making coffee and occasionally washing dishes or glasses.'' Id.\6\
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\3\ 29 U.S.C. 203(t).
\4\ See 32 FR 13575 (Sept. 28, 1967).
\5\ See 32 FR 13580-81 (codified at 29 CFR 531.56(e)).
\6\ In 2011, the Department issued a technical correction to its
original dual jobs regulation by updating the amount of tips needed
to qualify as a tipped employee under section 3(t) of the FLSA from
$20 per month to $30 per month, see 76 FR 18855, accounting for the
increase of that statutory threshold effectuated by the 1977 FLSA
Amendments. See Fair Labor Standards Amendments of 1977, Public Law
95-151, sec. 3, 91 Stat. 1245, 1249 (1977). The 2011 rule did not
otherwise change the Department's original dual jobs regulation.
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On December 30, 2020, the Department published Tip Regulations
Under the Fair Labor Standards Act (FLSA), 85 FR 86756 (2020 Tip Rule),
a final rule revising various regulatory requirements related to the
treatment of tipped employees under the FLSA. Among other changes, the
2020 Tip Rule would have revised the Department's original dual jobs
regulation at 29 CFR 531.56(e) consistent with subregulatory guidance
issued by the Department in 2018 and 2019,\7\ but the dual jobs
provisions in the 2020 Tip Rule never took effect.
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\7\ See 85 FR 86767-72, 86790.
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The 2020 Tip Rule was published with a scheduled effective date of
March 1, 2021.\8\ However, on February 26, 2021, the Department delayed
the effective date of the 2020 Tip Rule until April 30, 2021.\9\ On
March 25, 2021, the Department proposed to further delay the effective
date of three portions of the 2020 Tip Rule, including the portion of
the rule that would have amended the Department's dual jobs regulation,
until December 31, 2021.\10\ On April 29, 2021, the Department
finalized the proposed partial delay.\11\
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\8\ Id. at 86756.
\9\ See 86 FR 11632.
\10\ See 86 FR 15811.
\11\ See 86 FR 22597.
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On October 29, 2021, the Department published Tip Regulations Under
the Fair Labor Standards Act (FLSA); Partial Withdrawal, 86 FR 60114
(2021 Dual Jobs Rule), which withdrew the dual jobs provisions of the
2020 Tip Rule.\12\ Separately, the 2021 Dual Jobs Rule adopted at 29
CFR 531.56(e)-(f) a new dual jobs regulation, which--among other
changes--set specific limits on the amount of time that tipped
employees who are paid a direct cash wage which is less than the
Federal minimum wage can spend performing ``work that is not tip-
producing, but directly supports tip-producing work.'' \13\ The 2021
Dual Jobs Rule took effect on December 28, 2021.
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\12\ See 86 FR 60138.
\13\ 86 FR 60158 (codified at 29 CFR 531.56(f)(4)).
Specifically, the 2021 Dual Jobs Rule provided that tipped employees
must receive the full minimum wage from their employer whenever
untipped support work exceeds 20 percent of their workweek or 30
continuous minutes. Id. The 2021 Dual Job Rule also provided
examples of tasks that fall into the following three categories: (1)
tip-producing work; (2) work that directly supports tip-producing
work; and (3) work that is not part of a tipped occupation. 86 FR
60157-58 (codified at 29 CFR 531.56(f)(2)-(3) and (5)).
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On October 29, 2024, the United States Court of Appeals for the
Fifth Circuit issued a decision in Restaurant Law Center v. U.S.
Department of Labor, vacating regulatory text codified at 29 CFR
531.56(e)-(f) from the Department's 2021 Dual Jobs Rule, with the
effect of reinstating the Department's original dual jobs regulation.
115 F.4th 396 (5th Cir. 2024), superseded on reh'g (5th Cir. Oct. 29,
2024) (vacating the 2021 Dual Jobs Rule ``insofar as it modifies 29 CFR
531.56 as promulgated in 1967''). Since the Fifth Circuit's mandate
issued on October 29, 2024, the operative version of 29 CFR 531.56(e)
is thus the dual jobs regulation that was in place on December 27,
2021, prior to the effective date of the 2021 Dual Jobs Rule.
Consistent with the Fifth Circuit's mandate, this rule amends 29
CFR 531.56 to reinstate the regulatory text as it appeared prior to the
effective date of the 2021 Dual Jobs Rule. This action is a technical
correction accounting for changes in the law which have already
occurred.
II. Procedural and Other Matters
A. Administrative Procedure Act
Section 553(b)(B) of the Administrative Procedure Act (APA)
provides that an agency is not required to publish a notice of proposed
rulemaking in the Federal Register and solicit public comments when the
agency has good cause to find that doing so would be ``impracticable,
unnecessary, or contrary to the public interest.'' 5 U.S.C. 553(b)(B).
The Department finds that good cause exists to dispense with public
notice-and-comment rulemaking procedures in this final rule because
such procedures are unnecessary. The final rule accounts for the
effects of the Fifth Circuit's order in RLC, which already changed the
operative regulatory provisions by vacating regulatory text codified at
29 CFR 531.56(e)-(f) from the Department's 2021 Dual Jobs Rule, with
the effect of
[[Page 101886]]
reinstating the Department's earlier original dual jobs regulation. The
final rule makes technical non-substantive revisions to correct the CFR
to reflect the court's mandate. These amendments ensure the accuracy of
the CFR, but do not alter any regulatory obligations.
Section 553(d) of the APA provides that substantive rules should
take effect not less than 30 days after the date they are published in
the Federal Register unless ``otherwise provided by the agency for good
cause found[.]'' 5 U.S.C. 553(d)(3). The Department finds that good
cause also exists to make this final rule immediately effective because
a delayed effective date is unnecessary and contrary to the public
interest. A delayed effective date is unnecessary because the Fifth
Circuit's order vacating regulatory text codified at 29 CFR 531.56(e)-
(f) from the Department's 2021 Dual Jobs Rule has already taken effect.
Delaying the ministerial act of removing the regulatory text of the
vacated rule and restoring the operative regulatory text in the Federal
Register would also be contrary to the public interest in light of the
Department's need to expediently implement the court's final judgment,
and because it could lead to confusion, particularly among employers
and tipped employees, about the FLSA's requirements for the payment of
minimum wages to tipped employees. The Department concludes that a
delayed effective date is both unnecessary and is contrary to the
public interest, providing good cause to bypass a delayed effective
date.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (RFA) as amended by the
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA),
hereafter jointly referred to as the RFA, requires that an agency
prepare an initial regulatory flexibility analysis (IRFA) when
proposing, and a final regulatory flexibility analysis (FRFA) when
issuing, rules that will have a significant economic impact on a
substantial number of small entities. However, the RFA only applies to
``rule[s] for which the agency publishes a general notice of proposed
rulemaking pursuant to section 553(b) of this title, or any other
law.'' \14\ Because the Department has determined for good cause that
public notice and comment is not required, the Department is not
publishing a notice of proposed rulemaking for this final rule to
comply with the court's order. Therefore, the RFA and its procedural
requirements do not apply.
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\14\ See 5 U.S.C. 601(2); see also id. at 604(a) (requiring a
FRFA for rules where the agency was ``required . . . to publish a
general notice of proposed rulemaking'').
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C. Executive Orders 12866 and 13563
Under Executive Order 12866 (as amended by Executive Order 14094),
OMB's 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. As amended by
Executive Order 14094, section 3(f) of Executive Order 12866 defines a
``significant regulatory action'' as a regulatory action that is likely
to result in a rule that may: (1) have an annual effect on the economy
of $200 million or more; or adversely affect in a material way the
economy, a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or state, local, territorial, or
Tribal governments or communities; (2) create a serious inconsistency
or otherwise interfere with an action taken or planned by another
agency; (3) materially alter the budgetary impact of entitlements,
grants, user fees or loan programs or the rights and obligations of
recipients thereof; or (4) raise legal or policy issues for which
centralized review would meaningfully further the President's
priorities or the principles set forth in the Executive order.
Executive Order 13563 directs agencies to, among other things,
propose or adopt a regulation only upon a reasoned determination that
its benefits justify its costs; that it is tailored to impose the least
burden on society, consistent with obtaining the regulatory objectives;
and that, in choosing among alternative regulatory approaches, the
agency has selected those approaches that maximize net benefits.
Executive Order 13563 recognizes that some costs and benefits are
difficult to quantify and provides that, when appropriate and permitted
by law, agencies may consider and discuss qualitatively values that are
difficult or impossible to quantify, including equity, human dignity,
fairness, and distributive impacts. OIRA has determined that this final
rule is not significant for the purpose of Executive Orders 12866 and
13563.
D. Congressional Review Act
Before a rule can take effect, 5 U.S.C. 801, the Congressional
Review Act (CRA) requires agencies to submit the rule and a report
indicating whether it is a major rule to Congress and the Comptroller
General. This final rule does not qualify as a major rule for purposes
of the CRA and is therefore not subject to the timing requirements
provided in 5 U.S.C. 801(a)(3).
E. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-38,
requires agencies to consider whether a rule will result in the
expenditure of $100,000,000 or more (adjusted annually for inflation)
in any one year by State, local, and Tribal governments, in the
aggregate, or by the private sector. This technical amendment will not
result in such an expenditure.
F. Executive Order 13132, Federalism
The Department has (1) reviewed this proposed rule in accordance
with Executive Order 13132 regarding federalism and (2) determined that
it does not have federalism implications. The proposed rule would not
have substantial direct effects on the States, on the relationship
between the National Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
G. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq.,
and its attendant regulations, 5 CFR part 1320, require the Department
to consider the agency's need for its information collections, their
practical utility, the impact of paperwork and other information
collection burdens imposed on the public, and how to minimize those
burdens. The PRA typically requires an agency to provide notice and
seek public comments on any proposed collection of information
contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B); 5 CFR
1320.8. The final rule is also not subject to the requirements of the
PRA because it does not contain a collection of information as defined
in 44 U.S.C. 3502(3).
List of Subjects 29 CFR Part 531
Wages.
PART 531--WAGE PAYMENTS UNDER THE FAIR LABOR STANDARDS ACT OF 1938
0
1. The authority citation for part 531 continues to read as follows:
Authority: 29 U.S.C. 203(m) and (t), as amended by sec. 3(m),
Pub. L. 75-718, 52 Stat. 1060; sec. 2, Pub. L. 87-30, 75 Stat. 65;
sec. 101, sec. 602, Pub. L. 89-601, 80 Stat. 830; sec. 29(B), Pub.
L. 93-259, 88 Stat. 55 sec. 3, sec. 15(c), Pub. L. 95-151, 91 Stat
1245; sec. 2105(b), Pub. L. 104-188, 110 Stat 1755; sec. 8102, Pub.
L. 110-28, 121 Stat. 112; and sec. 1201, Div. S., Tit. XII, Pub. L.
115-141, 132 Stat. 348.
[[Page 101887]]
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2. Amend Sec. 531.56 by revising paragraph (e) and removing paragraph
(f) to read as follows:
Sec. 531.56 ``More than $30 a month in tips.''
* * * * *
(e) Dual jobs. In some situations an employee is employed in a dual
job, as for example, where a maintenance man in a hotel also serves as
a waiter. In such a situation the employee, if he customarily and
regularly receives at least $30 a month in tips for his work as a
waiter, is a tipped employee only with respect to his employment as a
waiter. He is employed in two occupations, and no tip credit can be
taken for his hours of employment in his occupation of maintenance man.
Such a situation is distinguishable from that of a waitress who spends
part of her time cleaning and setting tables, toasting bread, making
coffee and occasionally washing dishes or glasses. It is likewise
distinguishable from the counterman who also prepares his own short
orders or who, as part of a group of countermen, takes a turn as a
short order cook for the group. Such related duties in an occupation
that is a tipped occupation need not by themselves be directed toward
producing tips.
Signed this 12th day of December, 2024.
Jessica Looman,
Administrator, Wage and Hour Division.
[FR Doc. 2024-29798 Filed 12-16-24; 8:45 am]
BILLING CODE 4510-27-P
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</html>Indexed from Federal Register on December 17, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.