DOL Amends FLSA Regulations

The Department of Labor (DOL) has amended Fair Labor Standards Act (FLSA) and Portal-to-Portal Act regulations that are out of date because of subsequent legislation or court decisions. The revisions conform the regulations to FLSA amendments passed in 1974, 1977, 1996, 1997, 1998, 1999, 2000, and 2007, and Portal Act amendments passed in 1996. The amended regulations are effective May 5, 2011 [76 FR 18831-18860, 04/05/2011].

The following changes are included in the amended regulations:

Tipped employees. The FLSA allows employers to credit tips received by certain “tipped employees” against the minimum wage rate. Federal law defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 USC 203(m) requires an employer to provide advance notice to its employees that it is claiming the tip credit.

Federal regulation 29 CFR 531.59 has been amended to note that the notice should include the following information: (1) the amount of the cash wage that is to be paid to the tipped employee; (2) the amount by which the employee's wages are being increased on account of the tip credit (the credit can't exceed the value of the tips actually received by the employee); (3) that all tips received by the tipped employee must be retained by the employee except for tips received in a valid tip pooling arrangement; and (4) that the tip credit will not apply to any employee who has not been informed of these requirements.

The regs do not say that the above notice must be provided to employees in writing; however, the DOL notes that employers may wish to do so, since a physical document with all of the required information would permit employers to document that they have met the notification requirements in 29 USC 203(m) and federal regulations. If an employer fails to notify employees that part of their tips will be credited toward the minimum wage, the employer will be barred from taking a credit for the tips and could owe back pay.

29 USC 203(m) allows tip pooling “among employees who customarily and regularly receive tips.” Federal regulation 29 CFR 531.54 has been amended to note that 29 USC 203(m) does not impose a maximum tip pooling contribution percentage.

Exclusion of certain stock options from regular rate of pay calculations. Under 29 USC 207(e)(8), income derived from certain employer-provided grants or rights provided pursuant to a stock option, stock appreciation right, or bona fide employee stock purchase program, are not included in the computation of an employee's regular rate of pay for overtime purposes. Federal regulation 29 CFR 778.200(a)(8) has been added to conform the regulations to federal law.

Youth opportunity wage. Federal law ( 29 USC 206(g)) provides that new hires under 20 years of age may be paid $4.25 per hour for the first 90 calendar days after the date of hire. Federal regulation 29 CFR 786.300 has been updated to conform to the federal law.