There is now a limit to the amount of time tipped employees can spend on non-tipped activities when the employer receives a tip credit.
On Thursday, the U.S. Department of Labor clarified that the employer may only take a credit for the hours when an employee is doing work that can produce tips or tasks that directly support that work. This remains the case as long as the tipped worker does not spend a substantial amount of time doing tip-supporting work.
The new rule defines a “substantial amount of time” as more than 20 percent of the hours worked during an employee’s work week or a continuous period of time that exceeds 30 minutes.
This could impact wages for servers since employers that take tip credits only have to pay tipped employees a direct wage of $2.13 per hour.
Preparation work like stocking a bar or rolling silverware would be included under tip-supporting work and would count against the time limit rules.
It was an announcement met with trepidation by the National Restaurant Association.
“The timing of this decision couldn’t be worse for restaurants. As we go into the end of year holiday season, operators are now faced with new labor requirements. Restoring the Obama-era 80/20 rule is an arbitrary change that creates mass confusion and enormous compliance challenges for restaurants. This rule does not provide the clarity that small business owners and their employees need and is likely to increase litigation around the issue,” said Shannon Meade, VP of Public Policy and Legal Advocacy at the Association, in a statement.
The Department of Labor initially adjusted its tip regulations in 1967 with the understanding that some servers would spend time in roles that do not directly support producing tips, such as cleaning areas of a restaurant or making coffee.
The new outlined rule takes effect December 28. The Department of Labor updated this rule to help ensure restaurant employees benefit from the protection of the laws, especially as many of these tipped workers supported the country throughout the pandemic.
“Women, people of color and immigrants represent more than half of all tipped workers. Today’s final rule enhances protections for this vital segment of the nation’s essential workforce, and combats income disparity and promotes equity,” Wage and Hour Division Acting Administrator Jessica Looman said in a statement.