Tip Credit Rules: A Win for Employers
The U.S. Department of Labor (DOL) has been wrestling with the “tip credit” for decades, and its latest attempt to regulate it has been struck down by the Fifth Circuit Court of Appeals. This is good news for many employers in the hospitality industry, particularly in Texas, Mississippi, and Louisiana, where the ruling applies directly.
The DOL’s December 2021 rule aimed to limit the circumstances under which employers could claim the tip credit. It created a convoluted system that made it difficult to determine which tasks qualified as “tip-producing” work.
The Fifth Circuit found the rule to be arbitrary and capricious, arguing it was not in accordance with the law. The court also noted that the DOL had considered factors beyond those intended by Congress. The ruling could have a nationwide impact, providing much-needed clarity for employers struggling with the complexities of the tip credit.
While the future of the tip credit remains uncertain, this decision provides a temporary reprieve for employers. They can now breathe a sigh of relief, knowing they don’t have to navigate the confusing and contradictory rules of the December 2021 rule.
