December 9, 2018

December 07, 2018

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DOL Cancels 80/20 Rule for Tipped Employees

On November 7, 2018, the Department of Labor (DOL) issued an opinion letter ending what had become known as the “80/20 rule” for tipped employees. The new rule, which eases restrictions on an employer’s application of the tip credit, is a reissuance of a 2009 opinion letter that had been supplanted by contrary guidance since 2011.

When an employee works in an occupation in which he or she “customarily and regularly receives more than $30 a month in tips,” the employer may pay a reduced hourly wage (the federal minimum is $2.13, but higher minimum wages apply in some states) and claim a “tip credit” to make up the difference between the reduced wage and the $7.25 hourly minimum. See 29 U.S.C. § 203(m).

Under the 2011 DOL guidance, tipped employees were entitled to a full hourly wage if ancillary or non-tipped work exceeded 20 percent of their job duties (hence the 80/20 rule). This rule triggered a surge of lawsuits by tipped employees claiming their employers required them to perform non-tipped duties to take advantage of the tip credit.

The DOL’s most recent guidance rescinds the 80/20 rule. Now, regularly assigned, non-tipped duties related to tipped services will be considered part of a tipped employee’s job, provided they are performed contemporaneously with the tipped services. For example, a restaurant may require a server to perform non-tipped duties such as folding napkins, making coffee, etc., because they are related to serving tables and performed contemporaneously. The amount of time spent performing the ancillary duties will no longer affect an employer’s ability to claim a tip credit.

The opinion letter, FLSA 2018-27, is available here: https://www.dol.gov/whd/opinion/FLSA/2018/2018_11_08_27_FLSA.pdf. To ensure proper compliance with all federal and state wage and hour laws, employers are encouraged to consult legal counsel before changing any employment practices.

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About this Author

Faith Whittaker, Dinsmore Law Firm, Cincinnati, Labor and Employment Law Attorney
Partner

A partner in the Employment, Labor and Benefits Department, Faith has experience guiding clients through issues that arise in the workplace. She handles employment-related litigation for her clients, who range from local businesses to Fortune 500 companies.

Understanding each client has different tolerances and objectives in dealing with employment matters, Faith is passionate about learning her client’s industry and gaining insight into their operations. While always prepared to vigorously proceed through litigation, she teams with her clients...

513-977-8491
Associate

Zachary focuses his practice on labor and employment issues. He received his J.D. from the University of Cincinnati College of Law, and his experience includes researching cases on appeal from federal district courts and authoring memorandums for cases in areas such as civil rights, employee discrimination, Title IV, various workplace policies and post-conviction relief.

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