Last month, the United States Department of Labor (DOL) issued an opinion letter eliminating the “80/20” rule for tipped employees. Under the Fair Labor Standards Act, employers can take a “tip credit,” which allows them to pay employees who receive tips less than the minimum wage, as long as their tips will increase their hourly rate to more than the minimum wage. The 80/20 rule prohibited employers from taking a tip credit if an employee who performed tipped and non-tipped work spent more than 20 percent of his or her time engaging in non-tipped work.
The Department of Labor rescinded that rule and said that it will consider an employee to be engaging in work for which the tip credit is permitted if that employee engages in activities that are directly related to tip-producing activities. You can see that list of activities by clicking here. So, for example, filling salt shakers and cleaning up tables would be activities that are directly related to tipped work, and therefore time for which the tip credit could be applied, even if it constitutes more than 20% of the employee’s time.
So, the key lesson for employers here is that they no longer need to keep track of the amount of time that their employees spend on non-tipped time if that time is directly related to tipped activities.
This is another measure taken by the DOL in recent years that gives employers greater flexibility, especially in regards to tips. Last year, the DOL rescinded a rule which permitted tip-pooling, which occurs when servers share their tips with cooks, dishwashers, and other restaurant staff. Previously, employers could not require servers to share their tips with other employees, but the DOL reversed that and held that doing so was permissible.
Whether an employer can obtain a tip-credit for a particular employee is a relatively complicated matter, and it may be worth contacting an attorney for assistance in determining whether such a credit is available. The penalties for wrongfully taking a tip credit can include fines and potential liability in a lawsuit, so it is worth spending a little bit of money on an attorney to make sure that that you are following the law.
