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DOL Re-Issues Guidance Ending 80/20 Rule For Tipped Employees

Published by and on December 18, 2018

Employers may now claim tip credit for assigning non-tipped duties to tipped employees, so long as duties assigned are related to and performed contemporaneously with tipped services.

On November 7, 2018, the U.S. Department of Labor (“DOL”) issued an Opinion Letter clarifying that there would no longer be a limitation on the amount of non-tipped duties that an employer can assign a tipped employee in order for the employer to take advantage of the “tip credit” under 29 C.F.R. § 531.51. The Opinion letter rescinded prior guidance capping an employer’s use of the tip credit for assigning non-tipped duties exceeding 20% of the employees total job duties (so called the “80/20 Rule”).

Under the 80/20 Rule, tipped employees were entitled to full hourly wages (not tip credited wage) for non-tipped duties performed exceeding 20% of all work performed. The 80/20 Rule, set out in a 2011 Opinion Letter, lead to many lawsuits by tipped employees claiming that their employers were assigning non-tipped duties and taking advantage of the tip credit. The outcomes of these lawsuits were inconsistent, and led to confusion for employers of tipped employees regarding what work should be considered related or not related to tipped services performed by an employee, and whether only unrelated duties or including related non-tipped duties should be paid at a full hourly wage.

The November 7, 2018, Opinion Letter clarifies that the DOL has no intention to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as those duties are performed “contemporaneously with direct customer-service duties” assigned to a tipped employee. The DOL further guided that determining whether a particular duty is part of a tipped occupation should be made based on two principles:

  • Duties listed as core or supplemental for the appropriate tipped occupation in the “Tasks” section of the Details report in the Occupational Information Network (“O*NET”) or 29 C.F.R. § 531.56(e) should be considered directly related to the tipped duties of that occupation. No limitation shall be placed on the amount of these duties that may be assigned and performed, so long as these duties are performed contemporaneously with the duties involving direct service to customers or for a reasonable time immediately before or after performing duties for which the employee is tipped.
  • Employers may not take a tip credit for time spent performing any tasks not contained in the O*NET task list, however, some tasks not listed may be subject to the Fair Labor Standards Act’s de minimis rule.

Welter Insight

The DOL’s Opinion letter is welcome news for employers struggling to comply under the old 80/20 Rule. Although no longer subject to the 80/20 Rule, employers who employ tipped employees should review the O*NET task list (mentioned above) to ensure that any non-tipped duties assigned are related to and performed contemporaneously with the tipped duties performed by the employee. Additionally, employers should review state and local wage and hour laws to ensure tipped employees are compensated correctly. Finally, employers should seek legal counsel if they are unsure how to comply under the new Opinion Letter or if they intend to change any employment practices or policies based on the Opinion Letter.

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