The U.S. DOL Saves the Day: So Long to the 80/20 Rule
The application of the 80/20 Rule has been a hot topic in the restaurant industry the last several years because it is the foundation of an onslaught of collective and class action litigation brought by service workers claiming they were not paid minimum wage.
As a brief summary, the 80/20 Rule limits the use of the lower tip credit wage rate ($2.13 per hour) when a tipped employee spends more than 20% of their working time on non-tipped work. In other words, employers can only apply a tip credit to time spent on non-tipped work if such duties did not exceed 20% of the employee’s time. Take a look at our previous post regarding the 80/20 rule for more information.
Last year, in Marsh v. J. Alexander’s LLC the U.S. Ninth Circuit Court of Appeals struck down the 80/20 Rule and created a split among the circuits as to its validity. However, the Ninth Circuit reheard the Marsh v. J. Alexander’s LLC matter en banc and, reversed its prior ruling, determining (in line with other Circuits) that the 80/20 Rule was indeed valid.
More recently, in November 2018, the U.S. Department of Labor (“DOL”) issued an Opinion Letter stating that it has officially done away with the 80/20 Rule for tipped workers and restored its old guidance. The Opinion Letter states:
“We do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”
This result comes as welcome news for the restaurant industry, as restaurants no longer need to track a tipped employee’s every task and the amount of time spent on each task – a logistical nightmare. Additionally, this change may result in a reduction of minimum wage collective and class action claims brought by tipped employees and lift the administrative burden the 80/20 Rule placed on restaurant employers.