On April 6, 2018, the U.S. Department of Labor, Wage and Hour Division (“WHD”) issued Field Assistance Bulletin No. 2018-3 in response to Congress’ amendment to Section 3(m) of the Fair Labor Standards Act (“FLSA”) with the Consolidated Appropriations Act, 2018 (the “Act”). The Act, passed in March 2018, prohibits employers from keeping tips received by their employees and states that the WHD’s prior regulations that barred certain tip pooling practices have no further force or effect.

As stated by the WHD, “given these developments, employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped – such as cooks and dishwashers – to participate in tip pools.” Stated differently, as long as the tipped employees are paid at least the federal minimum wage, employers can require traditionally tipped employees to share their tips with traditionally non-tipped employees.  Notably, however, managers and supervisors are still prohibited by the FLSA from participating in tip pools.

Despite the change in the federal law, Massachusetts employers are prohibited from requiring or even permitting tip pools if any of the money is distributed to “any person who is not a wait staff employee, service employee, or service bartender.” See M.G.L. c. 149, § 152A.  The term “service employee” is defined by the statute to mean a person who works in an occupation in which employees customarily receive tips or gratuities, and who provides service directly to customers or consumers.

Accordingly, despite the Consolidated Appropriations Act and guidance from the WHD, hospitality employers in Massachusetts are prohibited from allowing employees who are not customarily and regularly tipped (such as cooks and dishwashers) to participate in tip pools.