[Federal Register Volume 86, Number 81 (Thursday, April 29, 2021)]
[Rules and Regulations]
[Pages 22597-22610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08927]



[[Page 22597]]

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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 10

Wage and Hour Division

29 CFR Parts 531, 578, 579, and 580

RIN 1235-AA21


Tip Regulations Under the Fair Labor Standards Act (FLSA); Delay 
of Effective Date

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Final rule; delay of effective date.

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SUMMARY: This action finalizes the Department of Labor's (Department) 
proposal to further extend the effective date of three discrete 
portions of the rule titled Tip Regulations Under the Fair Labor 
Standards Act (FLSA) (2020 Tip final rule), published December 30, 
2020. This further delay of three portions of the rule allows the 
Department to complete a separate rulemaking that proposes to withdraw 
and re-propose two of these portions of the 2020 Tip final rule, 
published March 25, 2021, which includes, inter alia, a 60-day comment 
period and at least a 30-day delay between publication and the rule's 
effective date. It will also provide the Department additional time to 
conduct another rulemaking to potentially revise that portion of the 
2020 Tip final rule addressing the application of the FLSA's tip credit 
provision to tipped employees who perform both tipped and non-tipped 
duties. All of the remaining portions of the 2020 Tip final rule will 
go into effect on April 30, 2021.

DATES: As of April 29, 2021, the amendments to 29 CFR 10.28(b)(2), 
531.56(e), 578.1, 578.3, 578.4, 579.1, 579.2, 580.2, 580.3, 580.12, and 
580.18, published December 30, 2020, at 85 FR 86756, delayed until 
April 30, 2021, on February 26, 2021, at 86 FR 11632, are further 
delayed until December 31, 2021.

FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Division of 
Regulations, Legislation, and Interpretation, Wage and Hour Division, 
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, 
Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-
free number). Copies of this document may be obtained in alternative 
formats (Large Print, Braille, Audio Tape or Disc), upon request, by 
calling (202) 693-0675 (this is not a toll-free number). TTY/TDD 
callers may dial toll-free 1-877-889-5627 to obtain information or 
request materials in alternative formats.
    Questions of interpretation or enforcement of the agency's existing 
regulations may be directed to the nearest WHD district office. Locate 
the nearest office by calling the WHD's toll-free help line at (866) 
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time 
zone, or log onto WHD's website at https://www.dol.gov/agencies/whd/contact/local-offices for a nationwide listing of WHD district and area 
offices.

SUPPLEMENTARY INFORMATION:

I. Background

    In the Consolidated Appropriations Act of 2018 (CAA), Congress 
added a new statutory provision at section 3(m)(2)(B) of the FLSA, 
which prohibits employers from keeping tips received by employees, 
regardless of whether the employers take a tip credit under section 
3(m). Public Law 115-141, Div. S., Tit. XII, sec. 1201, 132 Stat. 348, 
1148-49 (2018). The CAA also amended section 16(e)(2) of the FLSA to 
give the Department discretion to impose civil money penalties (CMPs) 
up to $1,100 \1\ when employers unlawfully keep employees' tips. On 
December 30, 2020, the Department published Tip Regulations Under the 
Fair Labor Standards Act (FLSA) (2020 Tip final rule) in the Federal 
Register to address these CAA amendments. See 85 FR 86756. Unrelated to 
the CAA amendments, the 2020 Tip final rule also revises the definition 
of ``willful'' in the Department's CMP regulations, and would largely 
codify the Wage and Hour Division's (WHD) guidance \2\ issued in 2018 
and 2019 regarding the application of the FLSA's tip credit provision 
to tipped employees who perform tipped and non-tipped duties. See id. 
The original effective date of the 2020 Tip final rule was March 1, 
2021. See id. A legal challenge to the 2020 Tip final rule was filed on 
January 19, 2021 by Attorneys General for eight states and the District 
of Columbia (Pennsylvania litigants), which is pending in the United 
States District Court for the Eastern District of Pennsylvania 
(Pennsylvania complaint or Pennsylvania litigation).\3\
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    \1\ The Federal Civil Penalties Inflation Adjustment Act of 1990 
(Pub. L. 101-410), as amended by the Debt Collection Improvement Act 
of 1996 (Pub. L. 104-134, sec. 31001(s)) and the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 
114-74, sec. 701), requires that inflationary adjustments be made 
annually in these civil money penalties according to a specified 
formula.
    \2\ See WHD Field Assistance Bulletin 2019-2 (Feb. 15, 2019) and 
WHD Opinion Letter FLSA2018-27 (Nov. 8, 2018).
    \3\ Commonwealth of Pennsylvania et al. v. Scalia et al., No. 
2:21-cv-00258 (E.D. Pa., Jan. 19, 2021).
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A. First Delay of the 2020 Tip Final Rule

    On February 26, 2021, after engaging in notice-and-comment 
rulemaking and considering the comments submitted, the Department 
published a final rule (Delay Rule) extending the effective date of the 
2020 Tip final rule until April 30, 2021, in order to provide the 
Department additional opportunity to review and consider questions of 
law, policy, and fact raised by the rule. See 86 FR 11632. The 60-day 
delay of the effective date of the 2020 Tip final rule was sought 
pursuant to the Presidential directive as expressed in the memorandum 
of January 20, 2021, from the Assistant to the President and Chief of 
Staff, titled ``Regulatory Freeze Pending Review.'' See 86 FR 7424.
    The Department explained in the Delay Rule that it would use the 
delay to review and consider, among other things, whether the 2020 Tip 
final rule properly implemented the CAA amendments to section 3(m) of 
the FLSA. In particular, the Delay Rule explained that the Department 
would review and consider the incorporation of the CAA's language 
regarding CMPs for violations of section 3(m)(2)(B) of the FLSA and 
whether the 2020 Tip final rule's revisions to portions of the CMP 
regulations on willful violations were appropriate. The Department 
would also review and consider whether the Department adequately 
considered the possible costs, benefits, and transfers between 
employers and employees related to the 2020 Tip final rule's revisions 
to the Department's dual jobs regulations, which largely codified WHD's 
recent guidance on the application of the tip credit to tipped 
employees who perform tipped and non-tipped duties, as well as whether 
the 2020 Tip final rule otherwise effectuates the CAA amendments to the 
FLSA. See 86 FR 11634. The Department explained that allowing the 2020 
Tip final rule to go into effect while the Department reviewed these 
issues could lead to confusion among workers and employers in the event 
that the Department proposed to revise the 2020 Tip final rule after 
its review; delaying the 2020 Tip final rule would avoid such 
confusion. Id.

B. Proposed Partial Delay of the Effective Date for Three Portions of 
the 2020 Tip Final Rule

    On March 25, 2021, the Department proposed to delay the effective 
date of

[[Page 22598]]

three portions of the 2020 Tip final rule for an additional 8 months, 
through December 31, 2021 (Partial Delay NPRM): the two portions 
addressing the assessment of CMPs; and the portion addressing the 
application of the FLSA tip credit to tipped employees who perform 
tipped and non-tipped duties. See 86 FR 15811. The first portion of the 
2020 Tip final rule that the Department proposed to further delay 
addressed the assessment of CMPs for violations of section 3(m)(2)(B) 
of the FLSA, see 29 CFR 578.3(a)-(b), 578.4, 579.1, 580.2, 580.3; 
580.12; and 580.18(b)(3). Notwithstanding the fact that the CAA amended 
section 16(e)(2) of the FLSA to grant the Secretary discretion to 
assess CMPs for violations of section 3(m)(2)(B) ``as the Secretary 
determines appropriate,'' the 2020 Tip final rule limited the 
Secretary's ability to assess CMPs for violations of 3(m)(2)(B) to 
those instances where the violation is ``repeated'' or ``willful.'' 
See, e.g., 85 FR 86772-73. The second portion of the 2020 Tip final 
rule that the Department proposed to further delay amended the 
Department's CMP regulations, see 29 CFR 578.3(c) and 579.2, to address 
when a violation of the FLSA is ``willful.'' See 85 FR 86773-74. The 
third portion of the 2020 Tip final rule that the Department proposed 
to further delay amended its ``dual jobs'' regulations, see 29 CFR 
531.56(e),\4\ to largely codify WHD guidance regarding when an employer 
can continue to take a tip credit for an employee in a tipped 
occupation who performs tipped and non-tipped duties. See 85 FR 86767-
72.
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    \4\ See also 29 CFR 10.28(b)(2) (incorporating the same guidance 
on when an employer can continue to take an FLSA tip credit for an 
employee who is engaged in a tipped occupation and performs both 
tipped and non-tipped duties in the Department's regulations 
relating to Executive Order 13658, ``Establishing a Minimum Wage for 
Contractors'').
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    In its Partial Delay NPRM, the Department sought comment on the 
proposed further delay of the effective date of these three portions of 
the 2020 Tip final rule. See 86 FR 15811. The Department also sought 
substantive comments on these three portions, and in particular, on the 
merits of withdrawing or retaining the portion of the rule that amended 
the Department's dual jobs regulations. See id. The Department did not 
propose to delay the effective date of the remaining provisions of the 
2020 Tip final rule not addressed in the Partial Delay NPRM. The 
remaining provisions--consisting of those portions that addressed the 
keeping of tips and tip pooling,\5\ recordkeeping,\6\ and those 
portions that made other minor changes to update the regulations to 
reflect the new statutory language and citations added by the CAA 
amendments and clarify other references consistent with the statutory 
text \7\--will become effective upon the expiration of the first 
effective date extension, which extended the effective date of the 2020 
Tip final rule through April 30, 2021. In a separate NPRM, titled Tip 
Regulations Under the Fair Labor Standards Act (FLSA); Partial 
Withdrawal, also published on March 25, 2021 (CMP NPRM), the Department 
proposed to withdraw and revise the two portions of the 2020 Tip final 
rule which addressed the assessment of CMPs under the FLSA: the portion 
which addressed the statutory provision establishing CMPs for 
violations of section 3(m)(2)(B) of the Act and the portion which 
addressed when a certain violation is ``willful.'' See 86 FR 15817.\8\
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    \5\ 29 CFR 10.28(c), (e)-(f); 531.50 through 531.52, 531.54.
    \6\ 29 CFR 516.28(b).
    \7\ 29 CFR 531.50, 531.51, 531.52, 531.55, 531.56(a), 531.56(c)-
(d), 531.59, and 531.60.
    \8\ In the CMP NPRM, the Department also sought comment on 
whether to revise one other portion of the 2020 Tip final rule that 
addresses the meaning of ``managers and supervisors'' under section 
3(m)(2)(B) of the FLSA and asked questions about how it might 
improve the recordkeeping requirements in the 2020 Tip final rule in 
a future rulemaking. See 86 FR 15817, 15818.
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    The Department explained in the Partial Delay NPRM that the 
proposed partial 8-month delay, until December 31, 2021, would provide 
the Department sufficient time to engage in a comprehensive review of 
three portions of the 2020 Tip final rule--the two portions of the rule 
which addressed the assessment of CMPs under the FLSA and the portion 
of the rule that addressed the application of the FLSA tip credit to 
tipped employees who perform tipped and non-tipped duties--and to take 
further action, as needed, to complete its review. See 86 FR 15815. The 
Department also explained that further review of these portions before 
they go into effect is particularly important given its concerns, which 
were also raised by the commenters on the Department's Delay Rule and 
the Pennsylvania litigants, that these portions of the rule raised 
significant substantive and procedural issues. See id.
    Commenters on the Department's Delay Rule and the Pennsylvania 
litigants argued, for example, that the portion of the 2020 Tip final 
rule that addressed the assessment of CMPs for violations of section 
3(m)(2)(B) is inconsistent with the FLSA and Congressional intent, 
since section 16(e)(2) of the FLSA does not require a finding of 
willfulness to assess a CMP for a section 3(m)(2)(B) violation. They 
also posited that the 2020 Tip final rule's revisions to the meaning of 
willfulness, particularly its removal of language regarding the meaning 
of reckless disregard, contradicted Supreme Court precedent on 
willfulness and Congressional intent. See 86 FR 15813-14.
    The Department explained in the Partial Delay NPRM that, upon 
review of the comments received regarding its Delay Rule and the 
Pennsylvania complaint, it was proposing to withdraw and re-propose the 
two portions of the 2020 Tip final rule that addressed the assessment 
of CMPs. See 86 FR 15813. The Department stated that it preliminarily 
believed that it was necessary to delay these two portion of the 2020 
Tip final rule while it completed this rulemaking to avoid codifying a 
limitation on the Department's ability to assess CMPs for violations of 
section 3(m)(2)(B) that may lack a basis in law, to ensure that the new 
regulations comport with the Supreme Court precedent regarding the 
meaning of willfulness, and to prevent confusion and uncertainty among 
the regulated community regarding what constitutes a willful violation. 
See id. at 15813-14.
    The Partial Delay NPRM further noted that commenters on the 
Department's proposed Delay Rule, as well as the Pennsylvania 
litigants, argued that the 2020 Tip final rule's test for when an 
employer can take a tip credit for a tipped employee who performs 
related, non-tipped duties (dual jobs test) relied on terms--
``contemporaneous with'' and ``a reasonable time immediately before or 
after tipped duties''--that district courts have found to be unclear; 
that the rule's use of the Occupational Information Network (O*NET) to 
define ``related duties'' authorized employer ``conduct that has been 
prohibited under the FLSA for decades'' and unlawfully permitted 
employers to keep employees' tips; and that the economic analysis of 
this portion of the rule failed to quantify or consider its impact on 
workers and disregarded evidence submitted by a commenter on the NPRM 
for the 2020 Tip final rule. See 86 FR 15814. Commenters on the Delay 
Rule and the Pennsylvania litigants also called into question whether 
the portion of the 2020 Tip final rule addressing the application of 
the FLSA tip credit to employees who perform tipped and non-tipped work 
could withstand judicial review, including whether this portion of the 
rule would withstand a challenge under the Administrative Procedure Act 
(APA) claiming that the Department's failure to include a

[[Page 22599]]

quantitative economic analysis for this portion of the rule was 
arbitrary and capricious. See id.
    The Department stated in the Partial Delay NPRM that, following its 
review of the comments submitted on the proposed Delay Rule and the 
Pennsylvania complaint, it was concerned that the 2020 Tip final rule 
did not accurately identify when a tipped employee who is performing 
non-tipped duties is still engaged in a tipped occupation. See 86 FR 
15814-15. Accordingly, the Department believed that it might be prudent 
to delay the effective date of this portion of the 2020 Tip final rule 
so that it could consider whether to engage in further rulemaking on 
this issue before it codifies such a test for the first time into its 
regulations. See id. The Department also stated that it preliminarily 
believed that it would be disruptive to employers to adjust their 
practices to accommodate the new test articulated in the 2020 Tip final 
rule and then have to readjust if that test does not survive judicial 
scrutiny or if the Department decides to propose a new test, and that 
delaying the effective date of this portion of the rule while the 
Department conducted its review would address these concerns. See id. 
at 15815.

II. Comments and Decision

A. Introduction

    The Department's Partial Delay NPRM sought comment on the proposed 
further delay of the effective date of three portions of the 2020 Tip 
final rule: The two portions that addressed the assessment of CMPs; and 
the portion of the rule that revised the Department's regulations to 
address the application of the FLSA tip credit to tipped employees who 
perform tipped and non-tipped duties. See 86 FR 15811. The Department 
also sought substantive comments on these three portions of the 2020 
Tip final rule, and in particular, on the merits of withdrawing or 
retaining the portion of the rule that amended the Department's dual 
jobs regulations. See id.
    A total of 22 organizations timely commented on the Partial Delay 
NPRM (86 FR 15811, Mar. 25, 2021) during the 20-day comment period that 
ended on April 14, 2021. Comments may be viewed on www.regulations.gov, 
document ID WHD-2019-0004-0497. The Department received comments from a 
broad array of stakeholders, including the Attorneys General for eight 
states and the District of Columbia who filed the Pennsylvania 
complaint, a law firm, industry groups, non-profit organizations, and 
advocacy organizations. Seventeen commenters supported the Department's 
proposal to further delay the effective date of three portions of the 
2020 Tip final rule. Five commenters opposed the proposed partial 
delay.\9\ In advocating for the proposed partial delay or opposing the 
proposed partial delay, all 22 commenters discussed the substance of 
the 2020 Tip final rule. Commenters who supported the proposed partial 
delay based their support, in significant part, on legal and policy 
concerns with the three portions of the 2020 Tip final rule, as well as 
concerns with the rule's economic analysis of the dual jobs portion of 
the rule. Commenters who opposed the proposed delay generally expressed 
support for the legal, policy, and factual conclusions made by the 
Department in the 2020 Tip final rule, including in the three portions 
that the Department proposed to delay.
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    \9\ The Department received three comments that are outside the 
scope of this rulemaking. An individual submitted a comment 
regarding issues unrelated to the Department of Labor or the FLSA. 
See WHD-2019-0004-0510. One organization submitted a duplicate of 
its comment. See WHD-2019-0004-0511; WHD-2019-0004-0526. The record 
also contains a document that was submitted by a WHD official to 
test the Regulations.gov comment system. See WHD-2019-0004-0497.
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B. Comments in Support of the Partial Delay

    Seventeen commenters supported the Department's proposal to delay 
the effective date of three portions of the 2020 Tip final rule for an 
additional 8 months, including nine Attorneys General (AGs), the 
National Employment Law Project (NELP), National Women's Law Center 
(NWLC), Restaurant Opportunities Centers United (ROC United), Women's 
Law Project (WLP), Center for Law and Social Policy (CLASP), Kentucky 
Equal Justice Center (KEJC), One Fair Wage (OFW), Oxfam America, 
Northwest Workers' Justice Project (NWJP), National Urban League (NUL), 
Loyola College of Law's Workplace Justice Project (WJP), Shriver Center 
on Poverty Law, Work Safe, Justice at Work, and the North Carolina 
Justice Center (NCJC). The Center for Workplace Compliance (CWC) 
supported the Department's proposal ``to the extent that it allows most 
provisions of the rule to go into effect on April 30.''
    The advocacy organizations that submitted comments in favor of the 
Partial Delay NPRM urged the Department to finalize the delay as 
proposed in order to evaluate the questions of law, policy, and fact 
raised by the portions of the 2020 Tip final rule proposed to be 
delayed. In its comments supporting the Partial Delay NPRM, NELP argued 
that the delay was ``critical'' and that allowing these portions of the 
rule to go into effect ``could create irreparable harm that would 
result from decreased wages for workers already struggling during a 
pandemic.'' NELP and the AGs also argued that the Partial Delay is 
important to give the Department time to fully consider the allegations 
in the Pennsylvania complaint that these portions of the rule lack a 
foundation in or are otherwise inconsistent with applicable law. NELP 
stated that allowing these three portions of the rule to go into effect 
would cause confusion and additional compliance costs if they are 
ultimately invalidated after judicial review. The Economic Policy 
Institute (EPI) also supported delaying the effective date of all three 
portions of the rule and stated that the Department should re-propose 
the dual jobs portion of the rule to establish a standard that is ``no 
less protective'' than the Department's ``longstanding 80/20 Rule.'' 
\10\
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    \10\ As noted in the 2020 Tip final rule, the Department's 80/20 
guidance became known as the ``80/20 rule,'' even though it was not 
promulgated as a regulation. See 85 FR 86761.
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1. Comments Regarding the Portions of the 2020 Tip Final Rule That 
Address CMPs for Violations of Section 3(m)(2)(B) and Willful 
Violations of the FLSA
    As noted above, a number of commenters supported further delaying 
the two CMP portions of the 2020 Tip final rule to give the Department 
time to consider the allegations raised in the Pennsylvania complaint 
and to complete further rulemaking. The AGs and many of the employee 
advocacy organizations stated that they supported further delay of the 
first portion of the 2020 Tip final rule related to CMPs which limits 
the assessment of CMPs to willful and repeated violations of section 
3(m)(2)(B) because the rule is in conflict with the plain statutory 
language of the FLSA providing the Secretary with discretion to assess 
those CMPs. See CLASP, KEJC, NCJC, NUL, NWJP, NWLC, OFW, Oxfam America, 
ROC United, WJP, and WLP. The AGs also argued that the second portion 
of the CMP regulations defining a ``willful'' violation under the FLSA 
for which CMPs can be assessed unlawfully limits the definition of 
willfulness because it conflicts with Supreme Court caselaw. A number 
of commenters, including the AGs, stated they would submit substantive 
comments regarding the assessment of CMPs in response to the CMP NPRM 
published on March 25, 2021, in which the Department has

[[Page 22600]]

proposed withdrawing and reproposing those two portions of the rule.
2. Comments Regarding the Portion of the 2020 Tip Final Rule That 
Address Changes to the Dual Jobs Regulations at Sec.  531.56(e)
    A number of advocacy organizations stated that they supported the 
Department's proposal to further delay the effective date for the 2020 
Tip final rule's dual jobs test for determining when an employee is 
engaged in a tipped occupation, because it departs from the former 
Department guidance of using a 20 percent limitation on related, non-
tipped duties, and would permit employers to continue paying tipped 
employees as little as $2.13 an hour for extensive periods of time 
where these employees are not earning tips. See CLASP, KEJC, NWJP, 
NWLC, NUL, OFW, Oxfam America, ROC United, and WLP. Pointing to the 
Department's acknowledgment in the 2019 tip NPRM that tipped employees 
might have a reduction in tipped income if they are allowed to perform 
more non-tipped work while still being compensated as little as $2.13 
an hour, the groups observed that the 2020 Tip final rule test could 
also have a significant, negative impact on non-tipped employees' 
wages. They explained that if tipped employees are permitted to do more 
non-tipped work at a lower rate of pay than non-tipped employees, it 
may result in lowering wages for non-tipped employees. These commenters 
argued that the 2020 Tip final rule's dual jobs test could also result 
in a reduction in the number of employees hired to perform non-tipped 
occupations, such as ``cleaners, maintenance, prep, and back-office 
workers.'' NWLC stated, ``[w]ith the regulatory barriers to abuse of 
the tip credit--and tipped employees--all but removed, millions of 
working people could be required to do more work for less pay.''
    Employee advocacy groups also asserted that although the Department 
had justified the change to the dual jobs regulations in the 2020 Tip 
final rule by explaining that the new test was easier to administer 
than its previous 80/20 guidance and would provide needed clarity, the 
Department's assertion is not borne out by the facts. As NELP stated, 
``[t]o the contrary, the 80/20 rule has been consistently used and 
accepted by courts and the Department itself over a 30-year period.'' 
Other employee advocacy groups asserted that the new dual jobs test 
uses ambiguous measures such as ``contemporaneous with'' and ``a 
reasonable time'', which could lead to litigation over those terms. 
They also noted that the vast majority of courts considering the 
Department's 2018-19 guidance, which uses these same terms, declined to 
accord deference to the guidance, in part because of this ambiguity. 
Similarly, the AGs argued in their comment supporting the additional 
delay of the effective date for the dual jobs portion of the rule that 
the 2020 Tip final rule will increase litigation because it 
``implements a vague standard that contains no limitation on the non-
tipped duties a tipped employee may be required to perform and still be 
paid the sub-minimum wage rate.'' As evidence of the vagueness of the 
standards, the AGs point to the language in the 2020 Tip final rule 
which ``states that `contemporaneous' means `during the same time as,' 
before making the caveat that it `does not necessarily mean that the 
employee must perform tipped and non-tipped duties at the exact same 
moment in time.' '' The AGs also argue that the 2020 Tip final rule 
nowhere provides an explanation of what it means to be performing 
related duties ``for a reasonable time.'' The AGs conclude that the 
additional extension for the effective date of this portion of the rule 
is necessary to give the Department time to consider and review this 
issue and to complete the rulemaking process if it decides to withdraw 
or revise the dual jobs provision.
    The AGs also argued that the Department's use of O*NET as a guide 
to determine which tasks are related or not related to a tipped 
occupation is flawed because O*NET, which is compiled from employee 
surveys of tasks that they perform in the occupation in which they are 
employed, ``seeks to describe the work as it is, not as is should be, 
and does not account for FLSA violations in industries known to have 
high violation rates, such as the restaurant industry.'' Thus, 
according to the AGs, the use of O*NET ``sanction[s] conduct that has 
been prohibited under the FLSA for decades.''
    The employee advocacy groups also posited that the 2020 Tip final 
rule's dual jobs provision conflicts with the new statutory provision 
in section 3(m)(2)(B) of the FLSA prohibiting employers from 
``keeping'' tips, because it allows employers to take a tip credit for 
a greater amount of time than the Department's previous 80/20 guidance. 
These groups encouraged the Department to abandon the 2020 Tip final 
rule's dual jobs test and use a rule that minimizes, rather than 
maximizes, employers' use of tips to satisfy their minimum wage 
obligations. These groups urged the Department to propose a new 
standard that is stronger even than its previous 80/20 guidance to 
prevent abuse of the tip credit and to protect low-wage tipped workers. 
These groups also urged the Department to consider the allegations 
raised in the Pennsylvania complaint related to the 2020 Tip final 
rule's dual jobs provision and noted that the arguments raised in the 
complaint, particularly that the rule ``contradicts the text and 
purpose of the [FLSA]'' and ``violated rulemaking process requirements, 
including failing to analyze the impact the rule would have on tipped 
workers,'' should be seriously considered and addressed in any future 
rulemaking. See CLASP; see also KEJC, NWJP, NWLC, NUL, OFW, Oxfam 
America, ROC United, and WLP.
    In its comment supporting the Partial Delay NPRM, EPI stated that 
the 2020 Tip final rule's revision to the dual jobs regulations created 
a ``less protective'' standard for tipped wages, replacing a firm 20 
percent limitation on the amount of related non-tipped duties that 
tipped employees could perform while being paid the tipped wage of 
$2.13 per hour with ``vague and much less protective'' language. EPI 
criticized the dual jobs portion of the 2020 Tip final rule as 
permitting ``tipped workers to be paid the subminimum tipped wage while 
performing an unlimited amount of non-tipped duties, as long as those 
non-tipped duties are performed `contemporaneously with tipped duties 
or for a reasonable time immediately before or after performing the 
tipped duties.' '' EPI noted that because these new regulatory terms, 
such as ``reasonable time,'' are not defined, they create an 
``ambiguity that would [be] difficult to enforce'' and would create 
``an immense loophole that would be costly to workers.'' EPI also 
encouraged the Department to create a rule that is ``stronger'' than 
the previous 80/20 guidance ``that further clarifies, and limits, the 
amount of non-tipped work for which an employer can claim a tip 
credit.'' EPI suggested that the Department could, among other things, 
consider tightening the definitions of related and unrelated duties, 
propose to adopt standards such as those adopted in states such as New 
York that, for example, bar an employer from taking a tip credit on any 
day during which they spend more than 20 percent of their time in a 
non-tipped occupation, and/or promulgate enhanced notice and 
recordkeeping requirements.
    With respect to the economic analysis conducted on the dual jobs 
portion of the 2020 Tip final rule, EPI suggested that it was flawed 
because it did not sufficiently estimate the economic impact on 
workers--as EPI did in a comment it submitted in the 2020 Tip

[[Page 22601]]

rulemaking, which concluded that the rule ``would allow employers to 
capture more than $700 million annually from workers.'' The AGs and 
NELP also argued in their comments in support of the Partial Delay NPRM 
that the Department's failure to quantitatively estimate the impact of 
the dual jobs portion of the 2020 Tip final rule or to consider the 
estimates of the rule's impact submitted by EPI and other groups in the 
course of that rulemaking is evidence that the rulemaking was arbitrary 
and capricious under the APA.
    In its comments supporting the Partial Delay, NELP also stated that 
a delayed effective date of the dual jobs portion of the rule would 
give the Department the opportunity to consider how the rule 
``improperly narrows the protections of the FLSA for tipped workers in 
a variety of fast-growing industries including delivery, limousine and 
taxi, airport workers, parking, carwash, valet, personal services and 
retail, in addition to restaurants and hospitality.'' Similarly, ROC 
United stated that the recent pandemic had restructured the nature of 
tipped employment in ways that should be taken into consideration in 
any future rulemaking. ROC United urged the Department to consider in 
its review of the dual jobs portion of the 2020 Tip final rule that 
restaurant workers' jobs had changed during the pandemic ``to include 
significant additional tipped duties for non-tipped occupations, and 
significant additional non-tipped duties for tipped occupations,'' and 
that the expanded use of contactless service interactions and purchases 
during the pandemic, including app-based delivery, had ``dramatically 
reduc[ed] customarily tipped interactions and increas[ed] tipping in 
non-tipped circumstances.''

C. Comments in Opposition of the Partial Delay

    Five organizations submitted comments that expressed opposition to 
the Partial Delay NPRM. The National Federation of Independent 
Businesses (NFIB) opposed the Department's proposed delay in the two 
portions of the 2020 Tip final rule regarding the assessment of CMPs. 
CWC stated that it was ``pleased to support DOL's proposal to the 
extent that it allows most provisions of the rule to go into effect,'' 
though it ``question[ed] the need to further delay the implementation 
of important provisions of the final rule.'' CWC directed the 
Department to the prior comments it submitted on the NPRM for the 2020 
Tip final rule and the Partial Delay NPRM. The National Retail 
Federation (NRF),\11\ the National Restaurant Association (NRA), and 
Littler Mendelson's Workplace Policy Institute (WPI) opposed the 
proposed delay of the dual jobs portion of the rule. The NRA also 
indicated that it would address the two portions of the 2020 Tip final 
rule regarding the assessment of CMPs in a subsequent comment on the 
CMP NPRM. All five organizations expressed general support for the 2020 
Tip final rule. The NRA and NFIB also noted that the COVID-19 pandemic 
has posed serious challenges for restaurants and other small 
businesses, which the Department should take into account in 
formulating its regulations.
---------------------------------------------------------------------------

    \11\ NRF and the National Council of Chain Restaurants (NCCR), a 
division of NRF, submitted a comment together.
---------------------------------------------------------------------------

1. Comments Regarding the Portion of the 2020 Tip Final Rule That 
Address CMPs for Violations of Section 3(m)(2)(B)
    NFIB stated that the Department should allow the portion of the 
2020 Tip final rule that addressed the assessment of CMPs for 
violations of section 3(m)(2)(B) to go into effect on April 30, 
2021.\12\ It argued that the 2020 Tip final rule appropriately limited 
the Department's ability to assess CMPs for violations of section 
3(m)(2)(B) to those instances where the violation is repeated or 
willful, since section 16(e)(2) of the FLSA confers ``wide discretion'' 
upon the Department. In the alternative, NFIB requested that the 
Department maintain the 2020 Tip final rule's limits on the assessment 
of CMPs for violations of section 3(m)(2)(B) for employers with fewer 
than 100 employees, citing the particular challenges of small 
businesses to comply with Federal regulations. CWC did not specifically 
oppose the proposed delay to the portion of the 2020 Tip final rule 
addressing the assessment of CMPs for section 3(m)(2)(B) violations; 
however, in its prior comments on the NPRMs for the 2020 Tip final rule 
and the Delay Rule, CWC stated that this portion of the 2020 Tip final 
rule addressing the Secretary's ability to assess CMPs for violations 
of section 3(m)(2)(B), as well as the identically-worded proposal in 
the NPRM for the 2020 Tip final rule, were consistent with the 
statute.\13\
---------------------------------------------------------------------------

    \12\ NFIB's comment addresses both the Partial Delay NPRM and 
the separate NPRM that the Department published on March 25, 2021. 
In addition to expressing its opposition to the delay of the 
portions of the 2020 Tip final rule addressing CMPs, NFIB's comment 
also opposes any further recordkeeping requirements and supports 
allowing tipped managers and supervisors to keep their own tips 
received directly from customers. The Department is not proposing to 
delay these portions of the 2020 Tip final rule; accordingly, NFIB's 
comments regarding these matters are outside the scope of this 
rulemaking. The Department will consider NFIB's comments regarding 
these matters in the separate rulemaking, the comment period for 
which closes on May 24, 2021. See 86 FR 15817.
    \13\ As noted above, WPI, the NRA, and NRF expressed general 
support for the 2020 Tip final rule.
---------------------------------------------------------------------------

2. Comments Regarding the Portion of the 2020 Tip Final Rule Addressing 
CMPs for Willful Violations of the FLSA
    NFIB also opposed the proposed delay to the portion of the 2020 Tip 
final rule that addressed CMPs for willful violations of the FLSA. 
According to NFIB, ``the definitions of `repeatedly' \14\ and 
`willfully' set forth in'' in the 2020 Tip final rule's revisions to 
the Department's CMP regulations ``are reasonable and practical.'' In 
the alternative, NFIB requested that the Department maintain the 2020 
Tip final rule's revisions to the definition of willfulness for 
employers with fewer than 100 employers.\15\ In its prior comments, CWC 
expressed support for the 2020 Tip final rule's revisions to the 
definition of ``willful'' in its CMP regulations.\16\
---------------------------------------------------------------------------

    \14\ The 2020 Tip final rule added a reference to violations of 
section 3(m)(2)(B) to the existing definition of ``repeated'' in the 
Department's CMP regulations but did not make any revisions to the 
definition of ``repeated.'' In the CMP NPRM, the Department has 
proposed removing the reference to 3(m)(2)(B) violations from the 
definition of repeated but has not proposed any revisions to the 
definition. See 85 FR 86756, 86792 (Dec. 30, 2020); 86 FR 15817, 
15827-28 (March 25, 2021); 29 CFR 578.3(b) (defining ``repeated'').
    \15\ Additionally, NFIB stated that the Department should 
``preserve the requirement in 29 CFR 578.4 that, in determining the 
amount of a CMP, the Department `shall consider the seriousness of 
the violations and the size of the employer's business[.]' '' The 
Department has proposed delaying for 8 months the revisions to Sec.  
578.4 made by the 2020 Tip final rule, and proposed additional 
revisions to this section in its separate NPRM dated March 25, 2021 
(CMP NPRM) to preserve the Department's authority to assess CMPs for 
violations of section 3(m)(2)(B). However, it has not proposed to 
revise the language in Sec.  578.4 providing that the Department 
``shall consider the seriousness of the violations and the size of 
the employer's business'' in determining ``the amount of penalty to 
be assessed.'' See 86 FR 15817, 15828.
    \16\ As noted above, the NRA, NRF, and WPI also expressed 
general support for the 2020 Tip final rule.
---------------------------------------------------------------------------

3. Comments Regarding the Portion of the 2020 Tip Final Rule Addressing 
Changes to the Dual Jobs Regulations at Sec.  531.56(e)
    In their comments opposing the Department's proposed delay to the 
dual jobs portion of the 2020 Tip final rule, the NRA and WPI argued 
that the 2020 Tip final rule dual jobs test is ``a step in the right 
direction'' and ``faithful to the FLSA's text'' insofar as the revised

[[Page 22602]]

dual jobs regulations eliminated the 20 percent limitation on the 
amount of time a tipped employee can perform related non-tipped duties 
and still be paid a direct cash wage of no less than $2.13 per hour. In 
support of this position, the NRA and WPI argued that, since the FLSA 
permits employers to take a tip credit for a ``tipped employee,'' 
defined as an employee engaged in a tipped ``occupation,'' the FLSA 
does not provide any basis for distinguishing between tipped workers' 
tipped duties and non-tipped duties. See 29 U.S.C. 203(m), (t).
    Commenters who opposed the proposed delay in the 2020 Tip final 
rule's revisions to Sec.  531.56(e) also argued that the 2020 Tip final 
rule dual job test will be easier for employers to administer than the 
Department's previous 80/20 guidance. In its prior comment on the Delay 
Rule, CWC stated that the revisions to dual jobs test would make 
compliance easier for employers; WPI likewise stated that the revised 
dual jobs test's use of O*NET to define related non-tipped duties would 
make compliance simpler. Additionally, WPI and the NRA stated that the 
revisions to the dual jobs test will lead to less litigation.
    The NRA also stated that there is no need to reconsider the dual 
jobs portion of the 2020 Tip final rule, as ``the Department already 
took years to consider every angle.'' According to the NRA, neither the 
Pennsylvania complaint nor the concerns with the rule's economic 
analysis raised by commenters such as EPI are grounds for delaying any 
part of the 2020 Tip final rule. Regarding the Pennsylvania complaint, 
the NRA emphasized that no court has ruled on any aspect of the 
complaint and that there has not been any briefing. Regarding the 
economic analysis, the NRA argued that EPI's criticism of the 2020 Tip 
final rule ``rest[s] on the flawed premise'' that the 2020 Tip final 
rule eliminated a ``quantitative cap'' on the amount of related non-
tipped duties a tipped worker can perform, since the Department had 
already ``abandoned'' the quantitative cap in 2018 when it issued 
Opinion Letter FLSA 2018-27. Therefore, ``EPI's baseline is simply 
incorrect.''
    Commenters who opposed the proposed delay of the dual jobs portion 
of the 2020 Tip final rule also expressed concern that delaying this 
portion of the rule would be disruptive to employers. NRF stated that 
its members had already undertaken ``efforts to implement the final 
rule in their operations nationwide.'' The NRA stated that ``since at 
least November 2018,'' when the Department issued its current guidance, 
``employers had already been adjusting.'' WPI made a somewhat different 
argument: It noted that some courts have continued to apply the 
Department's prior 80/20 guidance on related duties, rather than the 
Department's current guidance, and stated that allowing the 2020 Tip 
final rule's revisions to the dual jobs regulations to go into effect 
would bring clarity to employers.
    Although WPI opposed the proposed delay in the dual jobs portion of 
the 2020 Tip final rule, it included some recommendations for the 
Department to consider in the event that it ultimately proposes to 
withdraw and revise this portion of the rule. WPI stated that any 
alternative should include ``concrete guidance on where the lines are 
to be drawn,'' adding that, in its view, ``there has been no clear 
definition of what duties are `tipped' as opposed to merely `related' 
or `non-tipped.' '' WPI further stated that any ``quantitative limit'' 
on duties that a tipped employee can perform ``must precisely identify 
which duties fall on either side of the line,'' recognize that 
occupations can evolve over time, and draw upon O*NET as a resource.

D. Discussion of Comments and Rationale for Finalizing the Partial 
Delay of the 2020 Tip Final Rule

    In the Partial Delay NPRM, the Department stated that, in 
accordance with its review of questions of law, policy, and fact raised 
by the 2020 Tip final rule, most of the 2020 Tip final rule will go 
into effect upon the expiration of the first effective date extension, 
April 30, 2021. However, the Department proposed delaying three 
portions of the 2020 Tip final rule for an additional 8 months--the two 
portions of the 2020 Tip final rule that addressed the assessment of 
CMPs and the portion that revised the Department's dual jobs 
regulations--in order to engage in a comprehensive review of the issues 
of law, fact, and policy raised by these three portions of the 2020 Tip 
final rule and to take further action, as needed, to complete its 
review.
    After reviewing the comments received, the Department believes that 
these three portions of the 2020 Tip final rule should be further 
delayed until after the Department has completed its comprehensive 
review of these portions of the rule. Pursuant to this review, the 
Department has already initiated a separate rulemaking proposing to 
withdraw and re-propose the two portions of the rule addressing the 
assessment of CMPs. The Department intends to complete the CMP NPRM 
before the expiration of this Partial Delay. The Department also 
intends to initiate another rulemaking to potentially revise the 
portion of the 2020 Tip final rule related to the revision of its dual 
jobs regulations. Delaying these three portions of the 2020 Tip final 
rule until after the Department completes its review of these portions 
of the rule will allow the Department to reconsider legal, policy, and 
factual conclusions on which these three portions of the rule were 
based, and about which commenters who supported the Partial Delay NPRM 
have raised concerns. Delaying these three portions of the 2020 Tip 
final rule until after the Department completes its comprehensive 
review of these portions of the rule will also prevent harm to the 
Department, workers, and employers. In particular, delaying these three 
portions of the 2020 Tip final rule until after the Department 
completes its review will allow the Department to avoid codifying 
changes to its regulations that it may ultimately determine to lack a 
basis in law and that may not survive judicial scrutiny. It will also 
prevent changes to employment practices that may be contrary to the 
FLSA and harmful to workers, and which may need to be reversed in the 
event the Department withdraws and revises these portions of the 2020 
Tip final rule, causing disruption to employers. And it will prevent 
confusion and uncertainty among workers and the regulated community 
while the Department continues to review these portions of the 2020 Tip 
final rule.
1. CMPs for Violating Section 3(m)(2)(B)
    The first portion of the 2020 Tip final rule that the Department 
has proposed to further delay addresses the assessment of CMPs for 
violations of section 3(m)(2)(B) of the FLSA, which prohibits 
employers, including managers and supervisors, from ``keeping'' tips. 
As discussed above, the CAA amended section 16(e)(2) of the FLSA to 
grant the Secretary discretion to assess CMPs for ``each such 
violation'' of section 3(m)(2)(B) ``as the Secretary determines 
appropriate.'' See 29 U.S.C. 216(e)(2). Unlike the statutory provisions 
in section 16(e)(2) regarding CMPs for minimum wage and overtime 
violations, the statute does not limit the assessment of CMPs to 
repeated or willful violations of section 3(m)(2)(B). In the 2020 Tip 
final rule, the Department incorporated CMPs for violations of section 
3(m)(2)(B) into the Department's existing CMP regulations at 29 CFR 
parts 578, 579, and 580. The 2020 Tip final rule codifies in its 
regulations the Department's post CAA

[[Page 22603]]

enforcement policy, see FAB No. 2018-3, pursuant to which it assesses 
CMPs only for repeated or willful violations of section 3(m)(2)(B).
    However, in light of the comments submitted in support of the 
Department's Delay Rule and the Pennsylvania complaint, the Department 
became concerned that the 2020 Tip final rule inappropriately and 
unlawfully circumscribed its authority to issue CMPs for section 
3(m)(2)(B) violations. Accordingly, in the CMP NPRM published 
simultaneously with the Partial Delay NPRM, the Department proposed to 
withdraw this portion of the 2020 Tip final rule and proposed revisions 
to parts 578, 579, and 580 of its regulations to eliminate the 
restriction on the Department's ability to assess CMPs only for 
repeated and willful violations of section 3(m)(2)(B). 86 FR 15817. In 
the Partial Delay NPRM, the Department proposed delaying this portion 
of the rule until after the Department completes its review, explaining 
that this delay would avoid codifying a limitation on the Department's 
authority to assess CMPs that may lack a basis in law. See 86 FR 15821-
22.
    After reviewing the comments on the Partial Delay NPRM, the 
Department believes that there are strong grounds for engaging in 
further review of the portion of the 2020 Tip final rule that addressed 
the assessment of CMPs for violations of section 3(m)(2)(B) before it 
goes into effect. In the Partial Delay NPRM and the CMP NPRM, the 
Department identified serious legal and policy concerns with this 
portion of the rule, namely, that it may inappropriately and unlawfully 
circumscribe the Department's discretion to assess CMPs when employers 
unlawfully keep employees' tips. These concerns are reflected in 
comments submitted from the AGs and the numerous employee advocacy 
organizations that supported further delay of this portion of the 2020 
Tip final rule. These commenters argued that this portion of the 2020 
Tip final rule, by limiting the assessment of CMPs to willful and 
repeated violations of section 3(m)(2)(B), is in conflict with the 
plain statutory language of the FLSA providing that the Secretary may 
assess CMPs under this section ``as the Secretary determines 
appropriate,'' and thus explicitly provides the Secretary with 
discretion to assess those CMPs. See, e.g., NWLC; ROC United; OFW; 
CLASP. As the AGs explained in their comment, the Pennsylvania 
complaint alleges that ``[t]he Department's decision to require a 
willful violation of Section 203(m)(2)(B) to impose civil money 
penalties is contrary to the plain text of the statute,'' and ``flouts 
congressional intent.'' The NRA argues in its comment that the 
Pennsylvania complaint does not justify a further delay in the rule 
because the court has not yet ruled on the litigants' claims. However, 
the Department believes that the AGs' argument regarding the statutory 
text and legislative intent is sufficiently persuasive to finalize the 
additional delay of this portion of the rule, particularly where any 
harm from the delay is, on balance, offset by the need for additional 
consideration to avoid the possibility of codifying into the 
Department's regulations provisions that may not survive judicial 
scrutiny.
    To the extent that NFIB, as well as the CWC, NRF, and the NRA, 
dispute that this portion of the 2020 Tip final rule raises serious 
legal and policy concerns that merit further consideration by the 
Department, the Department disagrees. Citing the ``wide discretion'' 
that FLSA section 16(e)(2) affords the Department in determining 
whether to assess CMPs for 3(m)(2)(B) violations, NFIB argued that it 
is appropriate for the Department to impose the same limits on the 
assessment of CMPs for 3(m)(2)(B) violations as its imposes for CMPs 
for section 6 and 7 violations. However, section 16(e)(2) explicitly 
limits the Department's ability to assess CMPs for section 6 and 7 
violations to those that are ``repeated and willful''; the Department's 
existing CMP regulations in 29 CFR parts 578, 579, and 580 reflect this 
statutory limitation. Section 16(e)(2) contains no such limitation on 
the assessment of CMPs for violations of section 3(m)(2)(B); to the 
contrary, it explicitly provides the Secretary discretion to assess 
CMPs for violations of section 3(m)(2)(B) ``as the Secretary determines 
appropriate.''
    The Department had concluded in the 2020 Tip final rule that a 
desire for consistent enforcement procedures justified limiting the 
Department's assessment of CMPs for violations of 3(m)(2)(B) to the 
same extent as other FLSA CMPs. See 85 FR 86773. However, in light of 
the comments it has received in support of the Partial Delay NPRM, the 
Department has serious concerns that codifying such a limit on the 
assessment of CMPs for violations of section 3(m)(2)(B) in its 
regulations may fail to preserve what NFIB has appropriately 
characterized as the Department's ``wide discretion'' under the 
statute. The Department is therefore finalizing the delay of this 
portion of the rule as proposed. Delaying the effective date of this 
portion of the 2020 Tip final rule will provide the Department 
sufficient time to complete its comprehensive review of this portion of 
the rule, in particular, to allow the Department to consider the legal 
and policy conclusions on which this portion of the rule is based, and 
regarding which the AGs and advocacy organizations have raised serious 
concerns. This delay will also permit the Department to conduct notice 
and comment rulemaking regarding its separate CMP NPRM, in which the 
Department has proposed withdrawing and reproposing the portion of the 
rule addressing the assessment of CMPs for violations of section 
3(m)(2)(B), before this portion of the rule goes into effect.
    The Department thus finalizes its proposed delay of the portion of 
the 2020 Tip final rule addressing the assessment of CMPs for 
violations of section 3(m)(2)(B). The Department notes that, upon 
review of the comments it receives on the CMP NPRM, which proposed to 
withdraw and re-propose this portion of the rule, it may determine that 
it is not appropriate to withdraw or amend this portion of the 2020 Tip 
final rule. The Department will make that determination in the context 
of the CMP NPRM.
2. CMPs for Willful Violations
    The second portion of the 2020 Tip final rule that the Department 
proposed to further delay made revisions to those parts of the 
Department's FLSA regulations at Sec. Sec.  578.3(c) and 579.2 which 
address when a violation of the FLSA is ``willful.'' As discussed 
above, section 16(e)(2) of the FLSA authorizes the Department to assess 
a CMP against ``any person who repeatedly or willfully violates'' 
sections 6 and 7 of the FLSA, the Act's minimum wage and overtime 
requirements. 29 U.S.C. 216(e)(2). The regulations interpreting these 
statutory terms are intended to implement the Supreme Court's opinion 
in McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988), which 
held that a violation is willful if the employer ``knew or showed 
reckless disregard'' for whether its conduct was prohibited by the 
FLSA. The regulations provide that WHD shall take into account ``[a]ll 
of the facts and circumstances surrounding the violation'' when 
determining whether a violation is willful. See 29 CFR 578.3(c)(1), 
579.2. From 1992 until the Department issued the 2020 Tip final rule, 
the Department's CMP regulations at Sec. Sec.  578.3(c)(2) and 579.2 
provided that ``an employer's conduct shall be deemed knowing, among 
other situations, if the employer received advice from a responsible 
official of [WHD] to the effect that the conduct in question is not 
lawful.'' Sections

[[Page 22604]]

578.3(c)(3) and 579.2 also provided that ``an employer's conduct shall 
be deemed to be in reckless disregard of the requirements of the Act, 
among other situations, if the employer should have inquired further 
into whether its conduct was in compliance with the Act, and failed to 
make adequate further inquiry.'' However, courts of appeals considering 
those regulations concluded that there is an ``incongruity'' between, 
on the one hand, the regulatory provisions deeming two specific 
circumstances to be willful, and on the other hand, ``the Richland Shoe 
standard on which the regulation is based.'' Baystate Alternative 
Staffing, Inc. v. Herman, 163 F.3d 668, 680-81 (1st Cir. 1998); see 
also Rhea Lana, Inc. v. Dep't of Labor, 824 F.3d 1023, 1030-32 (D.C. 
Cir. 2016).
    The 2020 Tip final rule revised the ``willful'' portions of the 
Department's CMP regulations to attempt to address these courts of 
appeals decisions. The 2020 Tip final rule revised Sec.  578.3(c)(2) 
and the corresponding language in Sec.  579.2 to state that, in 
considering all of the facts and circumstances, an employer's receipt 
of advice from WHD that its conduct was unlawful ``can be sufficient'' 
to show that the violation is willful but is ``not automatically 
dispositive.'' However, the 2020 Tip final rule also deleted Sec.  
578.3(c)(3) and the corresponding language in Sec.  579.2 addressing 
the meaning of reckless disregard.\17\ The 2020 Tip final rule 
explained that an employer who should have inquired further but did not 
do so adequately is a specific scenario that courts have already 
determined is equivalent to reckless disregard, rather than a fact that 
could impact a determination of willfulness. 85 FR 86774. The 2020 Tip 
final rule stated that because such a scenario was not a ``fact'' or 
``circumstance'' that the Department should consider when determining 
reckless disregard, it was not appropriate to include it in the 
regulations. Id. Accordingly, the 2020 Tip final rule stated that 
revising Sec.  578.3(c)(3) in the same manner as Sec.  578.3(c)(2) 
``did not seem helpful'' and deleted that provision. Id.
---------------------------------------------------------------------------

    \17\ As noted above, Sec.  578.3(c)(3) and the corresponding 
language in Sec.  579.2 had provided, ``[A]n employer's conduct 
shall be deemed to be in reckless disregard, among other situations, 
if the employer should have inquired further into whether its 
conduct was in compliance with the Act, and failed to make adequate 
further inquiry.''
---------------------------------------------------------------------------

    In the Partial Delay NPRM, the Department proposed to further delay 
the effective date of this portion of the 2020 Tip final rule while it 
completes its review of this portion of the rule to ensure that the new 
regulations comport with the Supreme Court's decision in Richland Shoe 
and to prevent confusion and uncertainty among the regulated community 
regarding what constitutes a ``willful'' violation. As the Department 
noted in the Partial Delay NPRM, the Pennsylvania litigants argued that 
this portion of the 2020 Tip final rule is contrary to law because it 
``removes an employer's failure to inquire further into whether its 
conduct was in compliance with the Act from the Department's 
description of willfulness,'' ``contradict[ing] the Supreme Court's 
long-established definition of willfulness.'' See Delay NPRM (citing 
Commonwealth of Pennsylvania et al. v. Scalia et al., No. 2:21-cv-
00258, pp. 23-24, 94 (E.D. Pa., Jan. 19, 2021). The Department proposed 
that delaying the portion of the 2020 Tip final rule addressing the 
assessment of CMPs for willful violations until after the Department 
completes its review of this portion of the rule would avoid codifying 
into the Department's regulations provisions that, absent 
reconsideration by the Department, may not survive judicial scrutiny.
    In its CMP NPRM, the Department stated that it continued to believe 
that revisions to its 1992 regulations addressing the meaning of 
willfulness were needed in order to address the courts of appeals 
decisions discussed above. However, the Department asked for comment on 
whether modifications to this portion of the 2020 Tip final rule were 
needed to clarify that multiple circumstances, not just the 
circumstance identified, can be sufficient to show that a violation was 
knowing and thus willful. See 86 FR 15822. The Department also asked 
for comment on whether the 2020 Tip final rule inappropriately deleted 
the language at Sec.  578.3(c)(3) and the corresponding language at 
Sec.  579.2 addressing reckless disregard. Accordingly, the CMP NPRM 
proposed withdrawing and reproposing the portion of the 2020 Tip final 
rule addressing the meaning of willfulness; the CMP NPRM also proposed 
language addressing the meaning of reckless disregard.
    After reviewing the comments on the Partial Delay NPRM, the 
Department has decided to finalize the delay of the portion of the 2020 
Tip final rule addressing the meaning of willfulness as proposed. As 
with the portion of the 2020 Tip final rule addressing CMPs for 
violations of section 3(m)(2)(B), the Department has identified 
multiple serious concerns with this portion of the rule. These include 
the Department's concern that removing Sec.  578.3(c)(3) and the 
corresponding language in Sec.  579.2 could inadvertently suggest that 
an employer's failure to inquire further into the lawfulness of its 
conduct when it should have does not constitute reckless disregard, and 
therefore, willfulness; its concern that the 2020 Tip final rule's 
revisions to Sec.  578.3(c)(2) and the corresponding language in Sec.  
579.2 erroneously suggested that only an employer's receipt of advice 
from WHD, and no other circumstances, can demonstrate that a violation 
of the FLSA was knowing; and its concern that further revisions are 
needed to align these regulations with relevant Supreme Court 
precedent. Comments from the AGs and employee advocacy organizations 
confirmed and reinforced these concerns. Regarding the deletion of 
language regarding reckless disregard, for instance, the AGs noted that 
``[c]urrently, a violation is considered willful when the Department 
provides advice to an employer that it chooses not to follow or when an 
employer fails to inquire adequately into its legal obligations in some 
circumstances. However, if the 2020 Final Tip Rule takes effect, these 
actions would no longer be considered willful and subject to civil 
money penalties.'' Numerous advocacy organizations also asserted that 
these changes weaken worker protections under the FLSA. See, e.g., 
NELP; Oxfam America; Justice at Work.
    NFIB opposed the proposed delay in the portion of the 2020 Tip 
final rule addressing the assessment of CMPs for willful violations, 
which it characterized as ``reasonable'' and ``practical.'' CWC also 
expressed support for this portion of the rule in its prior comments. 
In its comment on the Delay Rule, for instance, CWC commended the 
Department for bringing its regulations regarding the meaning of 
willfulness ``more closely'' in line with appellate court precedent, 
specifically Baystate Alternative Staffing v. Herman, 163 F.3d 668 (1st 
Cir. 1998). As noted above, the NRA contended that the Pennsylvania 
litigants' legal challenge does not support delaying the 2020 Tip final 
rule, as no court has ruled on any aspect of the complaint, and NRF 
expressed general opposition to delaying the rule. As explained above, 
however, the Department has serious concerns that this portion of the 
2020 Tip final rule does not align with the Supreme Court's decision in 
Richland Shoe. Additionally, comments from the AGs and advocacy groups 
illustrate, at a minimum, that the 2020 Tip final rule's revisions to 
these CMP provisions have caused confusion about the Department's 
changes to those provisions. Accordingly, the

[[Page 22605]]

Department concludes that the portion of the 2020 Tip final rule 
addressing the assessment of CMPs for willful violations raises serious 
legal and policy concerns that merit further review by the Department.
    By delaying the effective date of this portion of the 2020 Tip 
final rule to allow sufficient time to undertake a comprehensive review 
of this portion of the rule, the Department will be able to evaluate 
the concerns discussed above before it goes into effect. The notice-
and-comment process associated with the Department's CMP NPRM, in which 
it has proposed withdrawing and reproposing this portion of the rule, 
will be integral to this review. The Department also believes that 
delaying this portion of the rule while it undertakes its review will 
prevent confusion and uncertainty among employers and workers regarding 
the definition of willfulness. As the comments from the AGs and 
advocacy organizations demonstrate, such confusion is likely to be 
caused, in particular, by the 2020 Tip final rule's removal of language 
regarding the meaning of reckless disregard from Sec.  578.3(c) and 
Sec.  579.2.
    The Department thus finalizes the proposed delay in the portion of 
the 2020 Tip final rule addressing the meaning of willfulness. The 
Department notes that, upon review of the comments it receives on the 
CMP NPRM, which proposes to withdraw and re-propose this portion of the 
rule, it may determine that it is not appropriate to withdraw or amend 
this portion of the 2020 Tip final rule. The Department will make that 
determination in the context of the CMP NPRM.
3. Dual Jobs Regulations
    The third portion of the 2020 Tip final rule that the Department 
proposed to further delay involves the amendment of its ``dual jobs'' 
regulations to address when an employer can continue to take a tip 
credit for an employee who is engaged in a tipped occupation and 
performs both tipped and non-tipped duties, see Sec.  531.56(e).\18\ 
For many years, the Department's subregulatory guidance addressing this 
issue permitted employers to continue to take a tip credit for the time 
a tipped employee performed non-tipped duties related to his or her 
tipped occupation unless the time spent in such duties exceeded 20 
percent of the employee's workweek (80/20 guidance). In 2018 and 2019, 
the Department changed its subregulatory guidance to provide that 
employers could continue to take a tip credit for any non-tipped work 
that a tipped employee performed which was related to his or her tipped 
occupation, provided that work was performed ``contemporaneously with'' 
or ``for a reasonable time immediately before or after'' his or her 
tipped work. The Department's guidance provided that employers could 
use O*NET, which is a database of worker attributes and job 
characteristics compiled by the Employment and Training Administration, 
to determine whether a duty was related or not related to the tipped 
occupation. See WHD Field Assistance Bulletin (FAB) 2019-2 (Feb. 15, 
2019) and WHD Opinion Letter FLSA2018-27 (Nov. 8, 2018) (2018-19 
guidance). In 2019, the Department proposed to amend its existing dual 
jobs regulations at Sec.  531.56(e) \19\ to incorporate this guidance. 
See 84 FR 53956. The 2020 Tip final rule largely codified the 2018-19 
guidance; the primary difference between the 2018-19 guidance and the 
2020 Tip final rule is that the final rule only used O*NET as a guide 
for determining related duties, rather than as a definitive source. See 
85 FR 86S756, 86790.
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    \18\ See also 29 CFR 10.28(b)(2) (incorporating the same 
guidance on when an employer can continue to take an FLSA tip credit 
for an employee who is engaged in a tipped occupation and performs 
both tipped and non-tipped duties in the Department's regulations 
relating to Executive Order 13658, ``Establishing a Minimum Wage for 
Contractors'').
    \19\ See also 29 CFR 10.28(b)(2).
---------------------------------------------------------------------------

    As the Department explained in the Partial Delay NPRM, a number of 
district courts have found that the test in the 2018-2019 guidance for 
when an employer can take a tip credit for a tipped employee who 
performs related non-tipped duties--limiting the tip credit to non-
tipped related duties performed ``contemporaneously with'' or for a 
``reasonable time immediately before or after'' performing tipped 
duties--is unclear or have otherwise refused to follow the test set 
forth in that guidance.\20\ Additionally, the Pennsylvania complaint 
challenges the dual jobs test in the 2020 Tip final rule, which largely 
codifies this guidance, under the APA. The Pennsylvania litigants who 
brought the complaint argue that the 2020 Tip final rule's dual jobs 
test--which also limits the tip credit to non-tipped related duties 
performed ``contemporaneously with'' or for a ``reasonable time 
immediately before or after'' performing tipped duties--relies on 
``ill-defined'' terms and fails to ``provide any guidance as to when--
or whether--a worker could be deemed a dual employee during a shift or 
how long before or after a shift constitutes a reasonable time.'' 86 FR 
15811.\21\ Additionally, the Pennsylvania litigants challenged the 2020 
Tip final rule's use of O*NET as a resource to determine ``related 
duties,'' which, according to their complaint, authorizes employers to 
engage in ``conduct that has been prohibited under the FLSA for 
decades.'' \22\ Given the concerns noted with this portion of the rule, 
the Department asked for comment on whether it should further delay the 
dual jobs portion of the 2020 Tip final rule to consider concerns 
raised in the Pennsylvania litigation as well as other aspects of that 
portion of the rulemaking, such as the validity of the economic 
analysis, and asked for

[[Page 22606]]

comments generally addressing the merits of the 2020 Tip final rule 
dual jobs test. The Department asked whether further delaying the 
effective date of this portion of the 2020 Tip final rule so that it 
could fully consider the merits of these claims and consider whether to 
engage in further rulemaking on this issue might be prudent before it 
codified such a test into its regulations for the first time. The 
Department noted that it would be disruptive to employers to adjust 
their practices to accommodate the dual jobs test articulated in the 
2020 Tip final rule and then have to readjust if that test does not 
survive judicial scrutiny or if the Department decides to propose a new 
dual jobs test. The Department proposed that delaying the effective 
date while the Department undertakes its review, instead of allowing 
this portion of the 2020 Tip final rule to be implemented, addresses 
this concern before employers change their practices to accommodate a 
dual jobs test that ultimately may not survive judicial scrutiny or 
that the Department may change.
---------------------------------------------------------------------------

    \20\ The preamble to the 2020 Tip final rule lists many of these 
decisions. See 85 FR 86770-71. For example, a district court stated 
that the 2018 DOL guidance ``inserts new uncertainty and ambiguity 
into the analysis'' and noted that the Department ``fails to explain 
how long a `reasonable time' would be, or what is meant by 
performing non-tipped work `contemporaneously' with tipped work.'' 
Flores v. HMS Host Corp., No. 18-3312, 2019 WL 5454647 (D. Md. Oct. 
23, 2019). District courts have also found that the Department's 
guidance contradicts the limitations (``occasionally,'' ``part of 
[the] time,'' and ``takes a turn'') that remain in the Dual Jobs 
regulation. For example, in Belt v. P.F. Chang's China Bistro, Inc., 
401 F. Supp. 3d 512, 533 (E.D. Pa. 2019), the district court held 
that the dual jobs guidance was unreasonable because ``the temporal 
limitations it imposes on untipped related work conflict with those 
in the text of the Dual Jobs regulation.'' See also Berger v. 
Perry's Steakhouse of Ill., LLC, 430 F. Supp. 3d 397, 411-12 (N.D. 
Ill. 2019) (same); Roberson v. Tex. Roadhouse Mgmt. Corp., No. 19-
628, 2020 WL 7265860 (W.D. Ky. Dec. 10, 2020) (same).
    \21\ See Commonwealth of Pennsylvania et al. v. Scalia et al., 
No. 2:21-cv-00258, p. 128, 131 (E.D. Pa., Jan. 19, 2021); see also 
id. at p. 129 (``The Department never provides a precise definition 
of `contemporaneous,' simply stating that it means `during the same 
time as'' before making the caveat that it ``does not necessarily 
mean that the employee must perform tipped and non-tipped duties at 
the exact same moment in time.''')
    \22\ See Commonwealth of Pennsylvania et al. v. Scalia et al., 
No. 2:21-cv-00258, p. 115 (E.D. Pa., Jan. 19, 2021) (``Because it 
seeks to describe the work world as it is, not as it should be, 
O*NET cannot and does not account for FLSA violations in industries 
known to have high violation rates like the restaurant industry; 
therefore, using it to determine related duties will sanction 
conduct that has been prohibited under the FLSA for decades.''); id. 
at p. 117 (``O*NET tasks for waiters and waitresses include 
`cleaning duties, such as sweeping and mopping floors, vacuuming 
carpet, tidying up server station, taking out trash, or checking and 
cleaning bathrooms'--when from 1988 until 2018, the Department's 
Field Operations Handbook specified as an example, `maintenance work 
(e.g., cleaning bathrooms and washing windows) [is] not related to 
the tipped occupation of a server; such jobs are non-tipped 
occupations.'''). Some district courts have levied similar criticism 
against the use of O*NET to perform this test. See, e.g., O'Neal v. 
Denn-Ohio, LLC, No. 19-280, 2020 WL 210801 at *7 (N.D. Ohio Jan. 14, 
2020) (declining to defer to the 2018 guidance in part because O*NET 
relies in part on data obtained by asking employees which tasks 
their employers assign them to perform, which ``would allow 
employers to ``re-write the regulation without going through the 
normal rule-making process,'' and is therefore unreasonable).
---------------------------------------------------------------------------

    After carefully considering the comments received, the Department 
has concluded that the dual jobs portion of the 2020 Tip final rule 
raises legal and policy concerns that warrant further delay of the 
effective date of this portion of the rule while the Department 
considers these issues and conducts another rulemaking to potentially 
revise that portion of the rule. The Department received a number of 
significant comments in support of further extension of the effective 
date of the dual jobs portion of the rule. These comments raised 
concerns similar to those raised in the Pennsylvania litigation: that 
the new dual jobs test sets too lax a standard and will depress tipped 
employees' wages and possibly eliminate non-tipped jobs, that the new 
test does not reflect the statutory definition of a tipped employee, 
that the terms used in the new test are so amorphous that they will 
lead to extensive litigation, that O*NET is not an appropriate tool to 
determine related duties, and that the Department's economic analysis 
for this portion of the rule did not sufficiently identify the economic 
impact of this new test on employees and employers.
    The Department shares the concerns of the commenters who supported 
the Partial Delay NPRM that, by removing the limit on the amount of 
time a tipped employee can perform related non-tipped duties, the new 
test articulated in the 2020 Tip final rule may not accurately identify 
when a tipped employee who is performing non-tipped duties is still 
engaged in a tipped occupation under the FLSA. The Department is also 
concerned that the 2020 Tip final rule's dual jobs regulations may be 
contrary to the prohibition on keeping tips in section 3(m)(2)(B) of 
the statute because it increases employers' ability to use tips to 
satisfy their minimum wage obligations.
    The NRA and WPI comments support permitting the dual jobs portion 
of the 2020 Tip final rule to go into effect, arguing that it would be 
inappropriate to revert back to the Department's previous 80/20 
guidance because the FLSA only refers to employees being employed in a 
``tipped occupation'' and therefore does not create any distinction 
between the tipped and non-tipped duties of a tipped employee.\23\ The 
Department is not proposing in this Partial Delay rulemaking to revert 
back to its 80/20 guidance. It notes, however, that the NRA and WPI 
reading of the statute is inconsistent with the position taken by the 
Department in the 2020 Tip final rule, which determines whether an 
employee is engaged in a tipped occupation based on the employees' 
duties.\24\ Particularly because this portion of the rule is being 
challenged under the APA and may not survive judicial scrutiny, the 
Department believes it should further delay the effective date of this 
portion of the rule. This will ensure that it has the opportunity to 
thoroughly consider commenters' concerns that the dual jobs portion of 
the 2020 Tip final rule is contrary to the FLSA, and propose and 
complete a new rulemaking on this issue, before the rule goes into 
effect.
---------------------------------------------------------------------------

    \23\ NRF also expressed general support for the 2020 Tip final 
rule's related non-tipped duties test, characterizing it as a 
``balanced approach.''
    \24\ Specifically, revised Sec.  531.56(e) distinguishes between 
tipped employees' tipped duties, for which employers can take a tip 
credit; non-tipped duties related to a tipped employee's occupation, 
which employers can take a tip credit for when they are performed 
contemporaneously or for a reasonable amount of time immediately 
before or after performing tipped duties; and non-tipped duties that 
are not part of a tipped employee's occupation, for which employers 
cannot take a tip credit.
---------------------------------------------------------------------------

    A number of commenters encouraged the Department to allow the dual 
jobs portion of the 2020 Tip final rule to go into effect because the 
new test, which eliminates the 20 percent limitation on related duties 
and uses O*NET as a resource for determining which duties are related 
to the tipped occupation, makes compliance easier for employers. WPI 
and the NRA, for example, stated that the revisions to Sec.  531.56(e) 
created a standard that is not as susceptible to litigation as the 
previous 80/20 guidance. On the other hand, a number of commenters who 
supported the further delay argued that the 2020 Tip final rule 
contained a number of amorphous terms, such as ``contemporaneous'' and 
``reasonable time'', that may not be sufficiently defined, a defect 
that could lead to extensive litigation over the scope of those terms. 
The Department agrees that it should at a minimum consider the argument 
that these terms are not adequately defined. The Department also agrees 
with the commenters that it should further delay the rule so that it 
can review the numerous court decisions which declined to defer to the 
Department's 2018-2019 guidance, which was the basis for the dual jobs 
test included in the 2020 Tip final rule, to determine whether those 
decisions identify any weaknesses in the 2020 Tip final rule dual jobs 
test. The Department also shares the concerns of the commenters that 
O*NET may not be an appropriate tool to identify duties related to 
tipped occupations. As the commenters pointed out, since O*NET compiles 
lists of duties that correspond to various occupations and is generated 
through employee surveys, it reflects the duties that tipped employees 
are performing, rather than the duties they should be performing.\25\
---------------------------------------------------------------------------

    \25\ As noted above, the NRA's comment opposing the further 
delay stated as a general matter that the Pennsylvania complaint 
does not support a delay of the 2020 Tip final rule. However, the 
Department believes that the concerns raised by commenters with both 
the substance of the dual jobs portion of the rule and the process 
by which it was promulgated--which mirror those raised in the 
Pennsylvania complaint--are sufficiently persuasive to warrant 
further delaying this portion of the rule.
---------------------------------------------------------------------------

    The Department also shares commenters' concerns with the process by 
which the Department promulgated the dual jobs portion of the 2020 Tip 
final rule, specifically, that the economic analysis may not have 
adequately estimated the impact of this portion of the rule. In 
particular, the Department is concerned that its analysis of the 
economic impact of the dual jobs portion of the 2020 Tip final rule 
failed to adequately address EPI's comment on the rule, and that 
alleged flaws in its economic analysis call into question whether this 
portion of the rule was the product of reasoned decision making. The 
NRA argued in its comment opposing an additional delay of the effective 
date that EPI's economic analysis of the dual jobs portion of the 2020 
Tip final rule was flawed because it used the wrong baseline. \26\ 
However,

[[Page 22607]]

the Department believes that the criticisms raised by EPI are 
sufficiently serious to warrant further review, even if the Department 
ultimately concludes that it used the correct baseline. Given the 
Department's concern that its economic analysis of the dual jobs 
portion of the 2020 Tip final rule may not be sufficient, the 
Department also shares EPI's concern, reiterated by numerous advocacy 
organizations, that allowing this portion of the rule to go into effect 
without further consideration of the economic analysis could 
potentially lead to a loss of income for workers in tipped industries, 
many of whom are continuing to struggle with the economic impact of the 
COVID-19 pandemic. \27\ Further delay of this portion of the rule would 
also allow the Department to consider any changes from the COVID-19 
pandemic to tipped work that should inform its ongoing consideration of 
the dual jobs portion of the rule.
---------------------------------------------------------------------------

    \26\ The NRA comment also asserts that the Department ``agreed 
not to assert such a limitation in pending and future investigations 
in response to litigation filed against the Department of Labor in 
federal court in Texas.'' In support, the NRA comment cites a Notice 
of Dismissal, filed in Restaurant Law Center v. Acosta, No. 1:18-cv-
00567-RP (W.D. Tex. Nov. 30, 2018), a case that challenged a prior, 
now superseded, interpretation reflected then in Section 30d00(f). 
The Department disagrees that the November 30, 2018, Notice of 
Dismissal limits its ability to reconsider this portion of the 
December 30, 2020 Tip final rule. Under the terms of that dismissal, 
the parties stipulated that Opinion Letter FLSA 2018-27 ``resolve[d] 
the case or controversy underlying the Complaint,'' and that WHD 
would ``instruct its staff, as a matter of enforcement policy, not 
to enforce the superseded interpretation'' in the Department's prior 
guidance ``with respect to work performed prior to the issuance of 
the Opinion Letter.'' Notice of Dismissal, Restaurant Law Center v. 
Acosta, No. 1:18-cv-00567-RP (W.D. Tex. Nov. 30, 2018). The 
Department did not agree in that prior litigation to constrain 
either its ability to reconsider its guidance or engage in future 
rulemaking on this issue. Id.
    \27\ Numerous commenters, both those who supported and those who 
opposed the Partial Delay NPRM, noted that the COVID-19 pandemic has 
had a particularly serious impact on the restaurant industry and 
tipped workers. See. e.g., OFW (noting that ``in the midst of the 
COVID-19 economic crisis'' tipped workers ``have already seen their 
tips plummet''); NRA (``It is important to highlight the fact that 
the restaurant industry has been uniquely hurt by the pandemic. No 
industry has lost more jobs or more revenue.'').
---------------------------------------------------------------------------

    In sum, the Department believes that the proposed delay of the dual 
jobs portions of the 2020 Tip final rule through December 31, 2021, is 
reasonable given the numerous issues of law, policy, and fact raised by 
the comments, which reflect very serious concerns with the substance of 
the dual jobs portion of the 2020 Tip final rule and the process 
through which it was promulgated. While an 8-month delay is 
significant, the Department believes that allowing this portion of the 
rule to go into effect may lead to harm to the Department, workers, and 
employers if the rule is ultimately invalidated. The Department 
appreciates the NRA's comment that there is no need to reconsider the 
dual jobs portion of the 2020 Tip final rule because the Department has 
already conducted a rulemaking to consider this issue and that it would 
be disruptive to employers to further delay implementation of the new 
rule. The NRA argues that employers have already implemented the dual 
jobs portion of the 2020 Tip final rule because they changed their 
practices to follow the Department's 2018-2019 dual jobs guidance. 
However, as WPI acknowledged, a number of courts have declined to 
follow the Department's 2018-19 guidance and have decided instead to 
adopt the Department's prior 80/20 guidance. Therefore, some employers 
have not applied the 2020 Tip final rule dual jobs test. Also, as 
explained above, the 2020 Tip final rule was based on the 2018-19 
guidance but is not identical to it. As also noted above, the 
Department believes that the concerns raised by the commenters that the 
dual jobs test lacks legal sufficiency should be explored before the 
dual jobs test is codified for the first time into the Department's 
regulations and that it would be more disruptive to employers if the 
rule went into effect only to be invalidated in the Pennsylvania 
litigation. The Department also believes that it is significant that a 
number of commenters, including EPI, NELP, and WPI have urged the 
Department to consider whether the dual jobs test could be 
strengthened, both in terms of employee protection and in workability. 
The Department will consider the specific recommendations made by 
commenters such as WPI and EPI as part of its ongoing review of the 
dual jobs portion of the 2020 Tip final rule.
    In sum, after considering the comments submitted, the Department 
believes that further delay is essential to inform the Department's 
comprehensive review of the dual jobs portion of the 2020 Tip final 
rule, including conducting a rulemaking to potentially revise that 
portion of the rule.
4. Length of the Proposed Delay
    In the Partial Delay NPRM, the Department proposed delaying the 
effective date of three portions of the 2020 Tip final rule--the two 
portions relating to the assessment of CMPs and the portion that 
revised the Department's dual jobs regulations--for an additional 8 
months, through December 31, 2021. See 86 FR 15812. The Department 
proposed that this additional delay would provide it with sufficient 
time to consider all aspects of these three portions of the rule, 
conduct rulemaking on two portions of the 2020 Tip final rule through 
the CMP NPRM, evaluate commenters' concerns, and consider whether to 
propose withdrawing and reproposing the third portion of the rule 
addressing dual jobs. The Department also noted that the CMP NPRM 
includes a 60-day comment period and that a final CMP rule would have 
at least a 30-day delay between publication in the Federal Register and 
its effective date.\28\ The Department solicited comments on whether 
the proposed period of delay is an appropriate length of time.
---------------------------------------------------------------------------

    \28\ The APA generally requires agencies to publish substantive 
rules ``not less than 30 days before [their] effective date.'' 5 
U.S.C. 553(d).
---------------------------------------------------------------------------

    The Department received one comment specifically addressing the 
length of the proposed delay. The AGs stated that the length of the 
delay was appropriate because it gives the Department sufficient time 
``to complete the rulemaking process and will avoid multiple 
rulemakings and delays,'' to ``consider and review'' all the issues 
raised by the portion of the 2020 Tip final rule addressing the 
Department's dual jobs regulations, and ``to complete the rulemaking 
process should it decide to withdraw or revise'' the portion of the 
2020 Tip final rule addressing dual jobs. As noted above, seventeen 
advocacy organizations supported the Partial Delay NPRM and five 
organizations opposed it.
    After carefully reviewing the comments received, and based on its 
extensive rulemaking experience, the Department concludes that the 
proposed 8-month delay provides it with sufficient time to complete its 
comprehensive review of these three portions of the 2020 Tip final 
rule, which will allow the Department to complete the CMP rulemaking as 
well as a separate rulemaking to potentially revise the dual jobs 
portions of the 2020 Tip final rule. Accordingly, the Department 
finalizes the proposed 8-month delay in these three portions of the 
2020 Tip final rule.
5. Effective Date of This Partial Delay
    This rule delaying the effective date of the two portions of the 
2020 Tip final rule addressing the assessment of CMPs and the portion 
of the 2020 Tip final rule addressing the Department's dual jobs 
regulations is effective immediately.\29\ Section 553(d) of the APA, 5 
U.S.C. 553(d), provides that publication of a substantive rule must be 
made no less than 30 days before its

[[Page 22608]]

effective date except, among other exceptions, ``as otherwise provided 
by the agency for good cause found.'' The Department finds that it has 
good cause to make this rule effective immediately upon publication 
because allowing for a 30-day delay between publication and the 
effective date of this rule would result in the three portions of the 
2020 Tip final rule that this rule delays taking effect before the 
delay begins. Such an outcome would undermine the purpose for which 
this rule is being promulgated and result in additional confusion for 
regulated entities. Moreover, this rulemaking institutes an 8-month 
delay of portions of the 2020 Tip final rule, rather than itself 
imposing any new compliance obligations on employers; therefore, the 
Department finds that a lapse between publication and the effective 
date of this rule delaying the Tip final rule's effective date is 
unnecessary. Because allowing for a 30-day period between publication 
and the effective date of this rulemaking is both unnecessary and would 
fundamentally undermine the purpose for which this rule is being 
promulgated, this final rule delaying the effective date of three 
portions of the 2020 Tip final rule is effective immediately upon 
publication in the Federal Register.
---------------------------------------------------------------------------

    \29\ The amendments made to 29 CFR 10.28(b)(2), 531.56(e), 
578.1, 578.3, 578.4, 579.1, 579.2, 580.2, 580.3, 580.12, and 580.18, 
revised at 85 FR 86756 (December 30, 2020), and delayed at 86 FR 
11632 (February 26, 2021) until April 30, 2021, are further delayed 
until December 31, 2021.
---------------------------------------------------------------------------

III. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its attendant Regulations, 5 CFR part 1320, require the Department 
to consider the agency's need for its information collections, their 
practical utility, as well as the impact of paperwork and other 
information collection burdens imposed on the public, and how to 
minimize those burdens. This final rule does not contain a collection 
of information subject to OMB approval under the Paperwork Reduction 
Act.

IV. Executive Order 12866, Regulatory Planning and Review; and 
Executive Order 13563, Improved Regulation and Regulatory Review

    Under Executive Order 12866, OMB's Office of Information and 
Regulatory Affairs (OIRA) determines whether a regulatory action is 
significant and, therefore, subject to the requirements of the 
Executive Order and OMB review.\30\ Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as a regulatory 
action that is likely to result in a rule that may: (1) Have an annual 
effect on the economy of $100 million or more, or adversely affect in a 
material way a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or state, local or tribal 
governments or communities (also referred to as economically 
significant); (2) create serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order. OIRA has determined that this delay is not economically 
significant under section 3(f) of Executive Order 12866.
---------------------------------------------------------------------------

    \30\ See 58 FR 51735, 51741 (Oct. 4, 1993).
---------------------------------------------------------------------------

    Executive Order 13563 directs agencies to, among other things, 
propose or adopt a regulation only upon a reasoned determination that 
its benefits justify its costs; that it is tailored to impose the least 
burden on society, consistent with obtaining the regulatory objectives; 
and that, in choosing among alternative regulatory approaches, the 
agency has selected those approaches that maximize net benefits. 
Executive Order 13563 recognizes that some costs and benefits are 
difficult to quantify and provides that, when appropriate and permitted 
by law, agencies may consider and discuss qualitatively values that are 
difficult or impossible to quantify, including equity, human dignity, 
fairness, and distributive impacts. The analysis below outlines the 
impacts that the Department anticipates may result from this delay and 
was prepared pursuant to the above-mentioned executive orders.
    In this rule, the Department will further extend the effective date 
of three portions of the 2020 Tip final rule in order to engage in a 
comprehensive review of the issues of law, fact, and policy raised by 
these three portions of the 2020 Tip final rule and to take further 
action, as needed, to complete its review. This delay will provide the 
Department additional time to complete the CMP rulemaking and as well 
as an additional rulemaking on the portion of the 2020 Tip final rule 
that addressed the application of the FLSA's tip credit provision to 
tipped employees who perform both tipped and non-tipped duties. The 
remainder of the 2020 Tip final rule, including portions that addressed 
the keeping of tips and tip pooling, \31\ recordkeeping, \32\ and other 
minor changes \33\ will become effective upon the expiration of the 
first effective date extension, which extended the effective date of 
the 2020 Tip final rule to April 30, 2021. See 86 FR 11632.
---------------------------------------------------------------------------

    \31\ 29 CFR 10.28(c), (e)-(f); 531.50-.52, 531.54.
    \32\ 29 CFR 516.28(b).
    \33\ 29 CFR 531.50, 531.51, 531.52, 531.55, 531.56(a), 
531.56(c)-(d), 531.59, and 531.60.
---------------------------------------------------------------------------

    In March 2018, Congress amended section 3(m) and sections 16(b), 
(c), and (e) of the FLSA to prohibit employers from keeping their 
employees' tips, to permit recovery of tips that an employer unlawfully 
keeps, and to suspend the operations of the portions of the 2011 final 
rule that restricted tip pooling when employers do not take a tip 
credit. In the economic analysis of the 2020 Tip final rule, the 
Department quantified transfer payments that could occur when employers 
institute non-traditional tip pools. Because these transfers have 
already been quantified, and the provision regarding tip pooling will 
go into effect on April 30, 2021, this delay will not have any impact 
on these quantified transfers.
    The Department expects that the industries that may be affected by 
the delay are those that were acknowledged to have tipped workers in 
the 2020 Tip final rule. These industries are classified under the 
North American Industry Classification System (NAICS) as 713210 
(Casinos), 721110 (Hotels and Motels), 722410 (Drinking Places 
(Alcoholic Beverages)), 722511 (Full-service Restaurants), 722513 
(Limited Service Restaurants), and 722515 (Snack and Nonalcoholic 
Beverage Bars). The 2017 data from the Statistics of US Businesses 
(SUSB) reports that these industries have 503,915 private firms and 
661,198 private establishments.\34\ The Department acknowledges that 
there are other industries with tipped workers that would have been 
affected by the 2020 Tip final rule.
---------------------------------------------------------------------------

    \34\ Statistics of U.S. Businesses 2017, https://www.census.gov/data/tables/2017/econ/susb/2017-susb-annual.html, 2016 SUSB Annual 
Data Tables by Establishment Industry.
---------------------------------------------------------------------------

    Part of the reason for an additional delay of the effective date is 
for the Department to conduct rulemaking on this portion of the rule 
that amended the Department's dual jobs regulations to address the 
application of the FLSA tip credit to tipped employees who perform both 
tipped and non-tipped duties. In the 2020 Tip final rule, the 
Department amended its dual jobs regulations to largely codify WHD's 
recent guidance regarding when an employer can take a tip credit for 
hours that a tipped employee performs non-tipped duties related to his 
or her occupation, which replaced the 20 percent limitation on related 
non-tipped duties with an updated related duties test. The Department 
provided a qualitative analysis of this change, and stated that the 
removal of a 20 percent limitation

[[Page 22609]]

on tasks that are not directly tied to receipt of a tip may result in 
tipped workers such as wait staff and bartenders performing more 
related non-tipped duties.\35\ The Department acknowledged that one 
outcome could be that employment of workers currently performing these 
duties may fall, and that tipped workers might lose tipped income by 
spending more of their time performing duties where they are not 
earning tips, while still receiving cash wages of less than the full 
minimum wage. The Department also stated that eliminating the cost to 
scrutinize employees' time to demonstrate compliance with the 20 
percent limitation would result in costs savings to employers. In the 
event that the 2020 Tip final rule's revisions to the dual jobs 
regulations would have led to cost savings for employers, transfers 
between employees and employers, or transfers among employees, these 
effects will be delayed by this rule. These effects may also change 
after the Department conducts rulemaking on the dual jobs portion of 
the 2020 Tip final rule.
---------------------------------------------------------------------------

    \35\ Examples of such duties are cleaning and setting tables, 
toasting bread, making coffee, and occasionally washing dishes or 
glasses.
---------------------------------------------------------------------------

    The effective date delay will allow the Department to better 
consider this provision and determine if there is a clearer way to 
address the application of the FLSA tip credit to tipped employees who 
perform both tipped and non-tipped duties. The delay will also provide 
the Department time to quantify any impact associated with such a 
change, if warranted, in the dual jobs rulemaking.
    Echoing their comment on the NPRM for the 2020 Tip final rule, EPI 
asserted in their comment on this delay that the removal of the 20 
percent limitation would result in transfers from workers to employers 
of more than $700 million annually.\36\ They also note that this figure 
was calculated pre-COVID-19, and that the impact on workers would be 
worse during the pandemic. ROC United also acknowledged that the 
situation for tipped workers has changed during the pandemic, partly 
due to ``the rise in contactless service interactions and purchases, 
along with growth in app based delivery.'' They recommend that the 
Department's analysis take into consideration changes to workforce and 
employment practices as a result of the COVID-19 pandemic. The 
Department agrees that more time is needed to evaluate the Department's 
dual jobs regulations, including how the changes brought about by 
COVID-19 would impact the proposal.
---------------------------------------------------------------------------

    \36\ Heidi Shierholz and Margaret Poydock, ``EPI Comments on the 
Department of Labor's Proposed Rule Regarding Tip Regulations,'' 
comments submitted on behalf of Economic Policy Institute to U.S. 
Department of Labor, December 10, 2019.
---------------------------------------------------------------------------

    Sixteen commenters agreed with EPI's analysis of the impact of the 
changes to the dual jobs regulations, and many asserted that the rule 
would harm women and people of color, both of whom are 
disproportionately represented in the tipped workforce. The NRA 
disagreed with this analysis, arguing that EPI's criticism of the 2020 
Tip final rule ``rests on a flawed premise--i.e., that current law 
reflects such a quantitative cap.'' They asserted that the baseline for 
any analysis of the 2020 Tip final rule should have been the guidance 
issued by WHD in 2018 and 2019, which rejects a quantitative limit on 
related non-tipped duties. The Department acknowledges that the 
baseline for both EPI's analysis and the 2020 Tip final rule measured 
the change from before the 2018-19 guidance was issued. The Department 
used this baseline in the 2020 Tip final rule in order to be 
transparent about the economic impact that would occur as a result of 
the 2018-19 guidance and the 2020 Tip final rule's changes to the dual 
jobs regulations, which largely codified that guidance. However, the 
Department believes that the criticisms raised by EPI are sufficiently 
serious to warrant further review, even if the Department ultimately 
concludes that it used the correct baseline.
    Commenters raised serious concerns with the economic analysis of 
the dual jobs portion of the rule, asserting that the Department did 
not sufficiently consider the costs, benefits, and potential transfers 
of this portion of the rule. For example, the AGs and NELP said that 
the Department's reluctance to quantitatively estimate the impact of 
the dual jobs portion of the rule and consider the estimates of the 
rule's impact submitted by EPI and other groups in the course of that 
rulemaking is evidence that the rulemaking was arbitrary and capricious 
under the APA. The Department will consider these concerns with the 
2020 Tip final rule's economic analysis, including whether the baseline 
for the economic analysis of the dual jobs portion of the 2020 Tip 
final rule was appropriate, in its comprehensive review of the dual 
jobs portion of the 2020 Tip final rule.
    The Department does not believe that the delay in the CMP portions 
of the 2020 Tip final rule will have an impact on costs or transfers, 
as these provisions only apply when an employer violates the FLSA.

V. Regulatory Flexibility Act (RFA) Analysis

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
as amended by the Small Business Regulatory Enforcement Fairness Act of 
1996, Public Law 104-121 (1996), requires federal agencies engaged in 
rulemaking to consider the impact of their proposals on small entities, 
consider alternatives to minimize that impact, and solicit public 
comment on their analyses. The RFA requires the assessment of the 
impact of a regulation on a wide range of small entities, including 
small businesses, not-for-profit organizations, and small governmental 
jurisdictions. Accordingly, the Department examined this rule to 
determine whether it will have a significant economic impact on a 
substantial number of small entities. The most recent data on private 
sector entities at the time this NPRM was drafted are from the 2017 
Statistics of U.S. Businesses (SUSB).\37\ The Department limited this 
analysis to the industries that were acknowledged to have tipped 
workers in the 2020 Tip final rule. These industries are classified 
under the North American Industry Classification System (NAICS) as 
713210 (Casinos), 721110 (Hotels and Motels), 722410 (Drinking Places 
(Alcoholic Beverages)), 722511 (Full-service Restaurants), 722513 
(Limited Service Restaurants), and 722515 (Snack and Nonalcoholic 
Beverage Bars). The SUSB reports that these industries have 503,915 
private firms and 661,198 private establishments. Of these, 501,322 
firms and 554,088 establishments have fewer than 500 employees.
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    \37\ Statistics of U.S. Businesses 2017, https://www.census.gov/data/tables/2017/econ/susb/2017-susb-annual.html, 2016 SUSB Annual 
Data Tables by Establishment Industry.
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    The Department has not quantified any costs, transfers, or benefits 
associated with this delay, and therefore certifies that this rule will 
not have a significant economic impact on a substantial number of small 
entities.

VI. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (UMRA) \38\ requires 
agencies to prepare a written statement for rules with a federal 
mandate that may result in increased expenditures by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $165 
million ($100 million in 1995 dollars adjusted for inflation) or more 
in

[[Page 22610]]

at least one year.\39\ This statement must: (1) Identify the 
authorizing legislation; (2) present the estimated costs and benefits 
of the rule and, to the extent that such estimates are feasible and 
relevant, its estimated effects on the national economy; (3) summarize 
and evaluate state, local, and tribal government input; and (4) 
identify reasonable alternatives and select, or explain the non-
selection, of the least costly, most cost-effective, or least 
burdensome alternative. This rule is not expected to result in 
increased expenditures by the private sector or by state, local, and 
tribal governments of $165 million or more in any one year.
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    \38\ See 2 U.S.C. 1501.
    \39\ Calculated using growth in the Gross Domestic Product 
deflator from 1995 to 2019. Bureau of Economic Analysis. Table 
1.1.9. Implicit Price Deflators for Gross Domestic Product.
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VII. Executive Order 13132, Federalism

    The Department has (1) reviewed this delay in accordance with 
Executive Order 13132 regarding federalism and (2) determined that it 
does not have federalism implications. The rule will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

VIII. Executive Order 13175, Indian Tribal Governments

    This rule will not have substantial direct effects on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

    Signed this 23rd day of April, 2021.
Jessica Looman,
Principal Deputy Administrator, Wage and Hour Division.
[FR Doc. 2021-08927 Filed 4-28-21; 8:45 am]
BILLING CODE 4510-27-P