U.S. DOL Provides Guidance on Tip Pools, Paid Breaks, and Travel Time Pay

A recent series of guidance documents released by the U.S. Department of Labor (“DOL”) clarified a number of important issues including the treatment of service worker tips, payment for time spent on FMLA related breaks, and pay for travel by employees without regular work hours.

Tip Pooling

On April 6, 2018 the DOL issued Field Assistance Bulletin No. 2018-3, which discusses the rights surrounding the ownership of customer tips. Previously, employers were prohibited from imposing a tip pooling arrangement covering tipped and non-tipped employees, even if the tipped employees received the full minimum wage as opposed to the lower tip credit wage. For example, employers could not require that restaurant waiters share their tips with cooks, hosts, or dishwashers, even if those waiters were already paid the full minimum wage.

Now, waitstaff can be required to share tips with non-tipped employees, provided the waitstaff is paid the full minimum wage, without counting the value of the tips. Where the lower tip credit wage is paid, sharing tips with employees who are not customarily and regularly tipped is still unlawful.

Unchanged is the requirement that managers and supervisors may never share in the tip pool, regardless of whether the full or tip credit wage is paid to non-exempt employees. For purposes of the law, a manager or supervisor is defined using the Fair Labor Standard Act’s definition of “Executive.” That is someone whose primary duty is management of the company, or of a customarily recognized department or subdivision; and who customarily and regularly directs the work of two or more other employees; and who has the authority to hire or fire other employees, or whose suggestions and recommendation in matters of hiring, firing, advancement or any other change of status is given particular weight.

Employers may continue to deduct credit card processing fees associated with the processing of credit card tips.

Employers who violate the law by keeping any portion of the tips paid by customers are subject to disgorgement of all unlawfully kept tips, an equal amount in liquidated damages, and where the violation is repeated or willful, civil penalties of up to $1,100.

While the DOL guidance only covers federal law, and although Connecticut generally follows federal law in this area, prudence suggests that Connecticut employers monitor any contrary interpretations that may be issued by state courts or agencies.

Paid Breaks

On April 12, 2018, the DOL issued Opinion Letter FLSA 2018-19, which clarified how employees taking short breaks (up to 20 minutes) for FMLA covered reasons are to be paid. Normally, under the FLSA, breaks of up to 20 minutes must be paid because they are considered “for the benefit of the employer” as they “re-energize” employees to perform future work.

Left unclear was whether short breaks taken for FMLA covered reasons must be paid. In its letter, the DOL clarified that FMLA related breaks are non-compensable because the FMLA states that any FMLA related leave is unpaid, and the break itself is primarily “for the benefit of the employee” to accommodate his/her serious health condition.

A key point, however, is that employees taking short breaks under the FMLA may not be treated worse than other employees. Therefore, if the employer permits all employees to take two 15-minute paid breaks per day, and the FMLA covered employee needs four such breaks, then two of the four breaks must be paid.

Travel Time Pay

The DOL issued a second Opinion Letter FLSA 2018-18 on April 12, 2018 covering pay for employees travelling on company business who lack regular work hours. Typically, when an employee travels on company business they must be paid for all hours spent traveling that correspond to their regular work hour schedule, even if the travel occurs on a weekend. For instance, if an employee works Monday to Friday, 8 a.m. to 4 p.m., and then travels on Saturday from 10 a.m. to 2 p.m., they must be paid for those 4 hours on Saturday.

When, however, the employee has no set schedule it becomes harder to determine whether the employee was traveling during regular work hours and thus eligible for pay, or outside such hours, which are then non-compensable, provided the employee performs no work during those hours. In this situation, the employer may rely on the following methods to determine whether the time is paid.

The employer may: (1) review an employee’s work record to determine their “typical work hours” during the most recent month; (2) if the “typical work hours” cannot be determined then the employer may rely on the average start and end times during the prior month; and (3) if in the rare case a determination under (1) or (2) cannot be made, the parties must negotiate and reach agreement on a reasonable amount of compensation for the travel time.

While the DOL points out these are not the exclusive ways to handle the situation, using one of them will provide a safe-harbor against wage claims.