On November 8, the Department of Labor retracted the Obama-era “80/20 rule” and clarified guidelines on how employers should properly compensate tipped employees.
Since it began on March 2, 2009, the confusing “80/20” rule has been causing headaches and lawsuits for restaurant employees. This rule prevented employers from taking tip credit from employees who spent more than 20 percent of their working time on non-tipped work. To fully implement this rule, employers would have had to continuously monitor tipped employees and document and differentiate their duties, which many employers found difficult to keep track of.
The opinion letter was released by the DOL Thursday and clarified wage-and-hour regulations under the federal Fair Labor Standards Act, abandoning the need for employers to track tipped employees performing non-tipping-related activities.
Under FLSA, employers are allowed to pay tipped employees no less than $2.13 per hour in wages and take a tip credit to make up the difference between the wages paid and the federal minimum wage. The issue with the 80/20 rule came down to tipped employees who spent time working on non-tip-generating duties, such as, rolling silverware or setting tables. Under the 80/20 rule, the employee couldn’t spend more than 20 percent of their time doing these side duties or employers would have to pay them full minimum wage. The new guidelines explain those duties are considered related to tip-producing work and the DOL is no longer limiting the amount of time spent performing duties of that type.
“We do not intend to place a limitation on amount of duties related to a tip-producing occupation that may be performed, provided they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met,” the DOL wrote.
The department argued that even though those tasks didn’t directly result in tips, they are “incidental to the regular duties of a server.”
There are still circumstances where “dual jobs” exist where employees would need to be paid minimum wage if they fell into this situation. However, this remains a gray area for the industry.
The DOL wrote, “The dividing line between “dual job” and “related duties” is not always clear … However, where the facts indicate that specific employees are routinely assigned to maintenance, or that tipped employees spend a substantial amount of time [in excess of 20 percent] performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties.”