On April 5, 2011, the Department of Labor’s Wage and Hour Division (WHD) published new regulations. Among other changes, the WHD raised the maximum federal tip credit from $4.42 an hour to $5.12. That means that, under federal law, an employer can pay a tipped employee $5.12 less than the minimum wage so long as the individual’s overall compensation equals at least the legal minimum wage.
Perhaps most noteworthy, however, is what the WHD did not do in issuing the regulations. In its 2008 proposed rules, which were issued during the Bush Administration, the WHD indicated that it was considering explicitly allowing employers to pay employees bonuses while still retaining the ability to use the flexible workweek (FWW) method of paying overtime. The FWW method is a way by which employers can pay overtime at only one-half times the employees’ regular rate rather than at one-and-one-half times the regular rate. It can only be used where certain conditions are met, including that the employees are paid a set salary and there is a clear agreement between the employer and the employees that their set salary is intended to cover all of the straight time hours they work in a week, regardless of whether those hours are over 40. In the final rule, however, the WHD opined that it did not adopt this proposed rule because it found that "bonus and premium payments . . . are incompatible with the fluctuating workweek method." This is certainly disappointing to employers using the FWW method.
The final rule also included several other changes, including a clarification of specific overtime exemptions for firefighters and an adoption of the youth opportunity wage provision, which allows an employer to pay employees under the age of 20 less than the minimum wage during the first 90 days of their employment.
The new regulations are set to take effect on May 5, 2011. A complete copy may be found here.