On June 23, 2021, the United States Department of Labor (DOL) issued a Notice of Proposed Regulatory Proposal (NPRM) that would reinstate the “80/20” approach previously used to determine when an employer can take tip credit for time. that an employee performs duty-free duties related to the employee’s tipping occupation, abandoning the duplication approach adopted by the previous administration in a final rule issued at the end of 2020. Under the proposed rule, an employer cannot take tip credit for time spent performing tasks without tips (1) so long as the time exceeds 20 percent of the employee’s work week, or (2) if the time exceeds 30 continuous minutes. The deadline for submit written comments on the proposed rule is August 23, 2021.
The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees at least the federal minimum wage, which is currently $ 7.25 an hour under the FLSA. However, employers can tip employees (that is to say, those who usually receive tips) a lower direct cash wage (as much as $ 2.13 per hour under federal law, although this minimum is higher under many state laws) and counts up to ‘to $ 5.12 per hour of tips from an employee towards the minimum wage requirement. This is commonly referred to as taking a “tip credit”.
The current FLSA regulations regarding tipped employees state that a dual-employed employee is a tipped employee for whom an employer can only take tip credit if he or she is employed in the tipping profession. In other words, when the employee performs two or more separate jobs for the employer, one (or more) of which is a tip and one (or more) is not, the employer can take a tip credit. only for the time the employee spends in this tip occupation.
Current regulations also recognize that an employee in a tipping profession may perform tasks that are not “tip-oriented”, such as a waiter “who spends part of his time” performing tasks without tips, such as “cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses.”
Prior to 2018, the DOL followed the 80/20 approach to determine when an employer can take tip credit for the hours a tip employee performs non-tip duties related to their tip occupation. Under this approach, an employer could continue to receive tip credit for the time an employee spent performing tasks related to their tip profession that do not result in a tip, but only if that time did not exceed 20 percent. cent of the employee’s work week.
In 2018, the DOL repealed its 80/20 guidelines and later issued new guidelines that would allow an employer to take tip credit for the time that a tip employee performs related duties and without tip, as long as the employee performs these tasks. at the same time or for a reasonable period immediately before or after, homework tips. The new directive also adopted the Professional Information Network (O * NET) as a source for determining when tipping fees relate to tip occupancy.
On December 30, 2020, just three weeks before President Biden’s inauguration, the DOL issued a final rule on employee tipping, which was to come into effect on March 1, 2021. The final rule incorporated updated DOL guidance regarding when an employer can take a tip. credit for time spent on non-tip duties related to a tip occupation.
However, in early 2021, after the Biden administration took office, the DOL twice extended the effective date of the duplication portion of the 2020 final tip rule for ” consider withdrawing and re-proposing it ”. The DOL has also delayed the effective date of the part of the 2020 final tip rule relating to the assessment of civil monetary penalties (and has since drafted a regulatory proposal notice related to that part). The remainder of the 2020 tip final rule, which deals with tip retention, tip pooling, record keeping and minor technical changes, came into effect on April 30, 2021 (after a brief initial delay).
The NPRM explains that the DOL now believes that the parts of the 2020 final tip rule regarding duplication “may not provide the clarity and certainty that employers want and may harm tip employees and non-tip employees in the workplace. industries that employ a significant number of tip workers.
The proposed rule
The proposed rule provides that “an employee is engaged in a tipping business”? and therefore the employer can take advantage of the tip credit? when performing either tipping work or work that directly supports tipping work, provided that the direct support work is not performed for a considerable period of time. “
For example, preparing food and cleaning bathrooms are not part of a waiter’s tip job because these tasks do not generate tips and do not directly support the job of tip production, so that the proposed rule still does not allow an employer to take tip credit for time spent at this job. However, cleaning tables to prepare for next customers would be considered work that directly supports the waiter’s tipping work of waiting at tables, so the proposed rule allows an employer to take tip credit for the time spent doing this job if it is not a a lot of time.
The proposed rule would reinstate the 80/20 directive by defining “a substantial amount of time” to mean more than 20% of the hours worked during the employee’s work week. A continuous period of more than 30 minutes is also a “substantial period of time” under the proposed rule. With regard to Directive 80/20, the proposed rule is slightly different (and more friendly to employers) from the previous Directive 80/20. Under the previous 80/20 directive, if an employee spent more than 20 percent of his or her working hours on non-tip duties, the employer could not claim the tip credit for any time spent on tasks without tips. Under the proposed rule, if an employee spends more than 20 percent of his or her working hours on non-tip duties, the employer could not claim the tip credit only for time spent performing non-tip duties in the workplace. -over 20 percent.
Thus, according to the proposed rule, a server that spends a continuous period of one hour (that is to say, more than 30 minutes) performing direct support work (cleaning tables for next clients, folding napkins, preparing silverware, garnishing plates, etc.) Therefore, the employer cannot take tip credit for that one hour period.
A waiter who works 30 hours a week and spends seven hours cleaning tables for next customers and garnishing plates (never more than 30 minutes at a time) spent “substantial time” doing support work directly. Under the proposed rule, the employer cannot take tip credit for any period that exceeds 20 percent of the work week, that is to say, one hour, but can still take tip credit for six hours of work without a tip.
What this means for employers
The proposed rule, which represents the second pivot on this question that employers of tipped employees have had to make in just a few years, marks a probable return to the much maligned (by employers) but frequently confirmed (by the courts) 80/20 rule for determining when employers can take tip credit for minimum wage for tip employees. The rule would be administratively burdensome for employers as it appears to require them to closely monitor the time employees spend even on non-tipping tasks supporting their tipping occupations, especially as service sector employers with tipped employees have struggling to emerge from the COVID-19 pandemic which has been devastating for many such businesses. The rule is also likely to result in an increase in litigation, potentially on a class basis which dramatically increases potential exposure, by employees who claim their employers have taken tip credits after working “a substantial amount of time. “by performing tasks without tips.
Until the proposed rule becomes final, employers claiming the tip credit for tip employees should work closely with a lawyer to assess their current payment and record-keeping practices and to restructure duties and responsibilities of employees to tip if necessary to comply with the proposed rule.
For more information
If you have any questions about this Alert, please contact Eve I. Klein, Christopher D. Durham, Natalie F. (Hrubos) Bare, one of the attorneys in our Employment, Labor, Benefits and Immigration practice group or the attorney at the firm with which you are regularly in touch.
Warning: This alert has been prepared and posted for informational purposes only and is not offered, nor should it be construed as legal advice. For more information, please consult the full warning.