DOL Issues Final Rule Amending FLSA Tip Credit Regulations | Constangy, Brooks, Smith & Prophete, LLP



Without wasting any time, the Wages and Hours Division of the US Department of Labor issued a Final rule Friday, which will formally withdraw the tip credit regulations that were issued in the final days of the Trump administration. The Biden administration’s regulations go into effect on December 28.

The Trump administration’s regulations were released on December 30, 2020, but after President Biden took office, his administration twice delayed their effective date. In July, the Administration responded to proposed regulation which would have partially withdrawn the Trump regulations and replaced them with new language. The publication of the final rule on Friday completes the process.

As planned, and in line with proposed regulations issued by the DOL in July, the final rule will codify, for the first time, previous DOL guidelines on the “80/20 rule” with respect to “secondary rights” ”d an employee with a tip. In the restaurant industry, these are tasks that may not directly generate tip income, but are related to the tip employee’s primary job of providing service to restaurant customers.


Under the Fair Labor Standards Act and many wage and hours laws, a tip employee may be paid less than the minimum hourly wage that applies to most employees. The rationale is that the employee makes up the difference (and often more than makes up for the difference) from the tips received. This is called a “tip credit” because the employer obtains credit for meeting their minimum wage obligations for tips the employee receives. However, tipped employees generally perform other duties (“side duties”) that may not be directly generate tips.

Historically, “side chores” in the catering industry have been viewed by DOL as including tasks such as cleaning and setting up tables, toasting bread, making coffee, filling containers. condiments, wrapping silverware in napkins, and placing toppings on foods before serving, such as adding croutons to a salad or topping a piece of pie with whipped cream. Since the late 1980s, the DOL has adopted what has been called the “80/20 rule,” which basically said that if a tip employee spent more than 20% of their time on secondary tasks, the tip credit could not be applied at this time. The 80/20 rule was a sub-regulatory effort by the DOL to clarify a regulation that spoke of “duplication” and specified that if an employee had two different jobs for the same employer, and one clearly met the definition of ‘One “tip employee” and the other did not, the tip credit could only be applied to time spent doing the job of a tip employee. The example used in the regulations was a housekeeping employee working in a hotel who also worked shifts as a waiter.

While the maintenance worker / server example is relatively straightforward, the analysis becomes much more complicated when looking at the tasks of full-time servers who also perform “secondary functions”. As a result, over the years, a considerable number of class action disputes have ensued regarding compliance with the 80/20 rule, and the restaurant industry has borne the brunt of it. The biggest challenge in most litigation was how to measure every minute of every shift to gauge when tip-generating tasks were performed and when secondary duties were performed.

Trump regulations seemed to offer hope for the restaurant industry. The regulation would have eliminated the 80/20 rule and replaced it with what appeared to be a more practical solution that could have at least reduced disputes over ancillary duties and tip credit. Employers could have applied the tip credit to time spent on secondary tasks as long as the secondary work was performed during, or “for a reasonable period immediately before or after”, the employee’s tipping work. The regulation would also have further defined what constituted and did not constitute a “secondary obligation” by reference to a federal database of professions known as the O * NET. However, the Trump regulations were due to go into effect on March 1, 2021, and by that time the Biden administration was in place. As a result, the Trump regulations never went into effect.

The Biden settlement

The Biden administration’s regulation, which comes into effect on December 28, will codify the 80/20 rule and add a new limitation not contained in the DOL guidelines issued so far – that employers cannot apply tip credit time spent on secondary tasks if the time exceeds 30 consecutive minutes. The regulations also codify the definitions of “tipping work” and “direct support work,” two terms essential to the application of the 80/20 rule and the 30-minute consecutive limitation.

Employees who perform “tip-generating work” – that is, work eligible for tip credit – include waiters, bartenders, nail technicians, buses, parking attendants, bartenders. service and hotel bellboys. In particular, the regulations say that the lists are illustrative and not exhaustive. For waiters, tip production includes table service, such as taking orders and making recommendations, and serving food and beverages.

“Direct support work” is properly subject to tip credit, but alone within the time limits of the 80/20 rule and the new 30 minute rule. The regulation again provides a list of illustrative but not exhaustive examples. “Direct support work” for restaurant waiters includes dining room prep work, such as filling salt and pepper shakers and ketchup bottles, rolling silverware into napkins, folding napkins. , sweeping or vacuuming under dining room tables, and setting up and transporting tables.

The regulation specifies that the 80/20 analysis must be applied on a weekly working basis by calculating 20 percent of the time spent in the work week for which the employer has applied tip credit. For example, 20% of 40 is 8. If a server works 40 hours per week and 10 of those hours are spent “directly supporting the work”, the employer may be able to apply tip credit for 8 hours of “direct support work” but should pay at least minimum wage for the additional two hours of “direct support work”.

In addition, tip credit cannot be applied to any time spent performing “direct support work” for a continuous period of more than 30 minutes. In particular, this time, as well as the hours worked for which no tip credit has been applied, are excluded in calculating the 20 percent tolerance.

Finally, the regulations state that no tip credit can be applied for time spent at a job that the DOL considers to be not at all part of the tip occupation – in other words, any job that does not respond not to the definition of “tip” to produce work ” Where “Directly support the work”. The policy provides another illustrative but not exhaustive list of examples for restaurant waiters, which includes preparing food (including salads) and cleaning the kitchen or washroom.

The practical implications

Unfortunately, the new regulations appear to do very little to prevent further litigation. The regulations provide a seemingly clear rule – that a tip credit should not be applied to employees who tip more than 30 minutes before customers or guests arrive, or more than 30 minutes after they leave. Aside from this simple rule, regulations should lead to disputes as to whether a particular job meets the definition of “tipping work”, “direct support work” or “work that is not part of the occupation. tip ”. The other obvious area of ​​potentially endless conflict relates to how employers track and measure the time spent doing “direct support work” to determine if the job is over 20% or 30 minutes.

It remains to be seen whether the validity of the regulations will be challenged in court.



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