Employment Law Report
Dear Department of Labor: FLSA Clarity from the DOL’s Opinion Letters
The Department of Labor (“DOL”) accepts and responds to letters from employees and businesses alike, providing guidance about how federal labor laws apply to everyday employment issues. Although these letters are based on real scenarios, they set forth principles applicable to any entity subject to the DOL’s oversight, especially as it relates to enforcement of the Fair Labor Standards Act (“FLSA”).
Recently, the DOL issued opinion letters providing guidance as to various FLSA issues. One such letter addressed the question of whether an employer could include front-of-house oyster shuckers in the restaurant’s tip pool. The letter looked first to the language of the FLSA. Under Section 3 of the FLSA, employers can satisfy a portion of the minimum wage requirements “by taking a tip credit equal to the difference between the required direct wage . . . and the federal minimum wage[,]” which results in a maximum tip credit of $5.12 per hour.[1] See 29 U.S.C. § 203(m)(2)(A). Notably though, for an employer to properly take a tip credit for the employee, the employee must be someone who is regularly engaged in getting tips. Consequently, the crux of the question is whether the oyster shuckers in this scenario can be considered tipped employees. Proceeding with an examination of case law, the letter emphasized that the common thread between the relevant cases is that “an employee must engage in service-related functions and have sufficient interaction with the customers who leave tips, a portion of which are subsequently contributed to a tip pool.” The letter arrived at the conclusion that front-of-house oyster shuckers are employees who customarily and regularly receive tips, and thus, the employer can require servers to share the tip pool.
Another letter recently issued by the DOL considered how and whether FLSA overtime requirements apply to an employee who worked at a hotel restaurant as well as the members-only club operated within the same hotel. The DOL letter determined this employee was jointly employed by the hotel restaurant and the members-only club, and as a result, her time spent at both places must be combined for the purpose of determining her weekly hours. In support of this conclusion, the letter noted that “even if two or more entities are considered separate employers, they can nonetheless be ‘joint employers’ under the FLSA if they have related employment relationships with the same employee(s).”[2] See, e.g., Chao v. A-One Medical Services, Inc., 346 F.3d 908, 917–18 (9th Cir. 2003). The effect of having joint employers is that all hours worked by the employee in a week are combined and then used to confirm the employee’s receipt of FLSA minimum wages and to determine the employee’s entitlement to overtime pay. Accordingly, the DOL’s letter concluded that if her combined weekly hours for both the hotel restaurant and the members-only club exceeded forty hours, she would be entitled to overtime pay because the club and the restaurant were horizontal joint employers.
Although these letters provide specific responses to particular scenarios, the insight and legal guidance from the DOL is instructive to employers. Whether or not tipping pools or issues related to joint employers affect your daily business, these DOL letters are an important reminder of the intricacies of the FLSA and the careful work required to ensure compliance.
[1] FLSA2025-03, Dep’t of Labor, Wage & Hour Div. (Sept. 30, 2025), https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA-2025-03.pdf.
[2] FLSA2025-05, Dep’t of Labor, Wage & Hour Div. (Sept. 30, 2025), https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA-2025-05.pdf.
