Advocacy Submits Comments to DOL on Tip Regulations Under the Fair Labor Standards Act (FLSA); Partial Withdrawal

The U.S. Small Business Administration’s Office of Advocacy (Advocacy) submits the following comments to the Department of Labor’s Wage and Hour Division (DOL) on its proposed rule, which adds restrictions to the use of the tip credit under the Fair Labor Standards Act (FLSA).[1] 

Advocacy is concerned that the DOL’s certification that the rule will not have a significant economic impact on a substantial number of small entities lacks an adequate factual basis.  DOL improperly certified this proposed rule because it omitted some and underestimated other compliance costs of this rule for small employers.   Small businesses have told Advocacy that the proposed rule will be costly and burdensome to implement in their busy restaurants, hotels, nail salons and other workplaces, as it will require businesses to track their workers’ tasks minute to minute to utilize the tip credit wage.  Small businesses have commented that these new restrictions for the use of the tip credit are complex and unworkable for small operations, who are already facing staff shortages and are just recovering from pandemic losses. 

Advocacy recommends that DOL prepare and make available for public comment an Initial Regulatory Flexibility Analysis (IRFA) that adequately assesses the small business compliance costs from this regulation and includes consideration of significant alternatives that would accomplish the objectives of the regulation while minimizing the economic impacts to small entities. 

Comment Letter

Fact Sheet

[1] Tip Regulations Under the Fair Labor Standards Act (FLSA); Partial Withdrawal, 86 Fed. Reg. 32818 (June 23, 2021) (hereinafter “2021 Proposed Rule”).