New Oyster Cult: Giving (Tip) Credit to the Frontman

DOL’s latest opinion letter cracks open tip pooling rules for customer-facing oyster shuckers.

The world of tip pooling under the Fair Labor Standards Act (FLSA) is a perennial source of confusion and litigation for restaurants and hospitality employers. Recently, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued Opinion Letter FLSA-2025-03, providing new clarity on whether “front-of-house” oyster shuckers can be included in a tip pool with servers when the employer takes a tip credit. Spoiler: if they’re shuckin’ in the spotlight, they’re in.

Background of Tip Pooling and Tip Crediting

Under the FLSA, employers must pay nonexempt employees at least the federal minimum wage (Fair Labor Standards Act, 29 U.S.C. § 206(a)).  However, for employees who “customarily and regularly receive tips,” employers may take a “tip credit,” paying a lower direct wage (as little as $2.13/hour federally) and using tips to make up the difference to the minimum wage (Fair Labor Standards Act, 29 U.S.C. § 203(m)(2)(A)).

When an employer takes a tip credit, those same employees, who customarily and regularly receive tips, may participate in a mandatory tip pool (29 C.F.R. § 531.54(c)).  Meanwhile, back-of-house staff such as dishwashers, cooks, chefs, and janitors, who typically do not interact with customers or perform tip-generating duties, are excluded from tip credits and tip pools.

Tip pooling is a practice in which employees who regularly receive tips, such as servers or bartenders, contribute a portion of their tips into a collective pool. This pooled amount is then distributed among a group of eligible employees—often including other front-of-house staff who interact with customers—based on a predetermined formula or arrangement. The goal is to ensure a more equitable sharing of tips among employees who contribute to the overall customer experience.

The DOL’s opinion comes amid a wave of renewed scrutiny and litigation over tip pooling practices. In Restaurant Law Center v. U.S. Department of Labor, the Fifth Circuit struck down the DOL’s 2021 “80/20 Rule,” which had limited the amount of time tipped employees could spend on non-tip-producing tasks while still qualifying for a tip credit (120 F.4th 163 (5th Cir. 2024)).

The court found the rule overly restrictive and inconsistent with the FLSA’s text, providing relief to employers who had struggled with its implementation (Restaurant Law Center, 120 F.4th at 171-75). The DOL has also recently issued other opinion letters on tip pooling, including FLSA2025-01, which clarified that managers and supervisors, even when performing non-supervisory duties, may not participate in tip pools under any circumstance.

Summary of the Opinion Letter

The employer in the DOL’s latest opinion letter operates a seafood restaurant with both front-of-house and kitchen-based oyster shuckers. The front-of-house shuckers work at a visible oyster bar and interact with customers by explaining oyster offerings, making suggestions, and answering questions—all while preparing oysters in plain view! In contrast, kitchen-based shuckers have no customer contact. The employer includes only the front-of-house shuckers in the tip pool with servers.

The DOL concluded that these front-of-house oyster shuckers are “employees who customarily and regularly receive tips.” The reasoning draws on longstanding DOL guidance and court decisions, emphasizing two key factors:

• Whether the employee performs customer service functions and
• Whether the employee has sufficient interaction with customers.

The DOL analogized the shuckers’ role to that of sommeliers, sushi chefs, and counter persons—occupations previously recognized as eligible for tip pools due to their direct customer engagement. Conversely, kitchen-based shuckers, like dishwashers or salad makers with no customer interaction, remain ineligible.

Potential Impacts and Takeaways

This opinion letter provides welcome clarity for restaurants with interactive food preparation roles, especially those with open kitchens or specialty bars. Employers can now more confidently include front-of-house oyster shuckers and by extension, similar roles like sushi chefs or teppanyaki cooks in tip pools with servers, provided these employees regularly interact with customers.

For employers, the key takeaway is to carefully evaluate which employees truly “customarily and regularly” receive tips through direct customer service and interaction. Documentation of job duties and customer-facing activities is essential.

Employers should consult with counsel to ensure compliance with both federal and state law, as local rules may impose additional requirements or restrictions.

If you have questions or need advice or guidance, please contact Lucy Brown or any member of the Phelps Labor and Employment team.